A handful of crypto trading platforms that are registered and regulated in Canada are expressing concern about marketing tactics employed by some foreign companies that are unsupervised by domestic securities agencies.
Crypto.com, a Singapore-based crypto exchange that has reportedly spent close to $1-billion on marketing deals with major sports leagues and celebrities, has its logo prominently displayed on the ice at the Bell Centre, home of the Montreal Canadiens NHL team.
But Crypto.com’s regulatory status in Canada is murky: It is not officially registered with any provincial or territorial securities regulator as a crypto trading platform, even though it advertises in this country and offers crypto trading services to Canadians through its mobile app.
In September, Canadian securities regulators issued advertising guidelines for crypto companies, warning them against misleading advertising and promotional tactics that could potentially lure investors into making risky trades. There was, however, no clear directive on whether unregulated crypto exchanges would be penalized for advertising in Canada.
But industry executives say there should be restrictions when companies are not licensed to do business here.
“I think it is absolutely ridiculous for an unregulated foreign crypto exchange to be able to engage in on the ground blanket advertising of their products to Canadians,” said Justin Hartzman, co-founder and CEO of CoinSmart Financial, a Toronto-based publicly-listed crypto trading platform.
Last March, the Canadian Securities Administrators, the umbrella group of provincial and territorial securities commissions, issued guidelines on how to regulate crypto exchanges. The CSA determined these businesses are essentially securities dealers because they facilitate trades.
CoinSmart and five other companies that offer crypto trading services – Wealthsimple, Coinberry, Netcoins, Fidelity and Bitbuy – are registered with securities regulators across all provinces and territories. The process of getting regulated, according to Mr. Hartzman, was long and time consuming, and disadvantaged CoinSmart because there were scores of other unregulated exchanges already offering the same services to Canadians.
“Of course we want to follow the rules. So while other companies are growing at an alarming rate, offering services to customers around the world, we have to go to each country we want to operate in, speak with their regulators and obtain licensing,” he added.
Bitbuy CEO Michael Arbus told The Globe and Mail that allowing entities such as Crypto.com to advertise so prominently in Canada creates an “unfair playing field” for local crypto companies that have endeavoured to comply with domestic securities regulations.
“We actually applaud the Crypto.coms of the world because their megamillion marketing deals are generating awareness and mainstream acceptability for the entire category around the world,” Mr. Arbus said. “That being said, it’s hard for Canadian crypto companies to compete with these unregulated multinational platforms, like Crypto.com, and their massive marketing budgets on our home soil. This allows these international platforms to market a lot of coins and products that our Canadian regulators would never approve if they were licensed.”
His views were echoed by Netcoins CEO Mark Binns, who said regulators should stop foreign unlicensed crypto companies from advertising in Canada if they are not in the process of getting regulated.
“The issue for us is that big players can take advantage of cross-border opportunities with advertising. Any time an American is watching the Montreal Canadiens play, they’ll see the Crypto.com ad. If we want to advertise in a foreign jurisdiction, we have to go through an approval process,” he said.
The CSA did not have a direct comment on whether Crypto.com’s advertising deal with the Canadiens falls within securities rules. In an e-mail, CSA spokesperson Pascale Bijoux said crypto trading platforms should “consult their legal counsel and contact staff of their local securities regulator on what steps they may need to take in order to comply with advertising, marketing and social-media requirements under securities legislation.”
In a recent interview with The Globe, Crypto.com chief marketing officer Steve Kalifowitz said the company’s partnership with the Canadiens – a one-year deal signed in March, 2021, that includes branding on the ice at the Bell Centre – was advantageous for the company because of how far the Canadiens advanced in last year’s Stanley Cup playoffs.
“Hockey is the sport of Canada and the Canadiens are such a well-known team, so we felt it was the right fit,” said Mr. Kalifowitz, who is based in Hong Kong.
The company embarked on a marketing blitz in 2021, striking advertising deals with high-profile sports associations such as the NBA, Formula One, UFC and a number of soccer leagues, including Italy’s Serie A.
In November, Crypto.com obtained the naming rights to the Staples Center in Los Angeles, which is now Crypto.com Arena, home of four professional sports teams, including the NBA’s Los Angeles Lakers and Los Angeles Clippers, and the NHL’s Los Angeles Kings. The Washington Post and several other media outlets reported that the deal was valued at US$700-million. The company also reportedly spent more than US$100-million on TV ads starring Matt Damon that have been airing in more than 20 countries.
Mr. Kalifowitz would not comment on how much Crypto.com has spent on advertising to date, but added that his goal was to turn the platform into a “home-name brand like Nike or Apple.” He also declined to clarify if the company had obtained regulatory approval from Canadian regulators to advertise at the Bell Centre.
Mr. Arbus, Bitbuy’s CEO, said he hopes entities that enter into advertising contracts with crypto companies do their due diligence to determine if that advertiser is able to legally offer its services to Canadians. “We hope they are thinking about crypto advertising with the same level of care as they do any other product or service.”
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