Grant Vingoe, CEO of the Ontario Securities Commission, in Toronto on May 1, 2020.Melissa Tait/The Globe and Mail
The chief executive officer of Canada’s largest securities regulator says legislative oversight of foreign and domestic cryptocurrency companies is critical for the country’s capital markets, but the crypto industry needs to do a better job of policing itself instead of waiting for supervision from a watchdog.
At an event held Thursday by the Economic Club of Canada in Toronto, Grant Vingoe, CEO of the Ontario Securities Commission, spoke widely about the regulator’s plans for the crypto sector under its new structure and expanded mandate, which was implemented earlier this year. He warned investors of pitfalls, describing digital assets and cryptocurrencies as highly volatile.
Mr. Vingoe believes there is “great potential” for blockchain technology, digital ledgers upon which cryptocurrencies such as bitcoin are based, and that it has broad applications for businesses, institutions and governments. However, in the crypto market as a whole, “most of the investment remains largely speculative,” he said.
“The prominent losses, platform failures and instances of fraud we’ve all heard about have a devastating cost to people’s financial lives,” Mr. Vingoe said in his speech to dozens of attendees in a large conference hall.
“Equally concerning is that our economy also pays a price for this outsized focus on speculative crypto investments. Promoting speculation takes away much-needed capital from businesses that are looking to grow and employ people outside of the crypto universe.”
Mr. Vingoe said the OSC has taken some enforcement actions against international players who are flouting rules to operate in Canada. For example, over the summer, the OSC cracked down against two crypto-trading platforms: Bybit Fintech Ltd. of the British Virgin Islands; and a collective known as KuCoin, which comprises Seychelles-based Mek Global Ltd. and Singapore-based PhoenixFin Pte. Ltd.
But there is a long road ahead, he said, and the regulator is facing a dilemma on multiple levels.
First, there is the issue of non-compliance, Mr. Vingoe said. To operate in Canada, global crypto platforms must now register with the OSC and other regulators, or face bans and sanctions.
While Mr. Vingoe said this has been effective against some international players that “don’t want the stigma of being censured in Canada,” others continue to operate in the country without being regulated, such as Binance of the Cayman Islands. Many Canadians who use international crypto platforms employ VPN technology that allows them to disguise their locations through a virtual private network, Mr. Vingoe added, calling it “the very definition of an uneven playing field.”
Then, there is the issue of resources. “With a limited budget and finite enforcement staff to cover our entire capital markets, there is only so much we can do,” Mr. Vingoe said, adding that the OSC has not yet dedicated staff specifically toward enforcing rules for cryptocurrency firms.
“It’s certainly a whole new class of oversight we’re talking about here. And I have to be honest, we are stretched quite thin with it.”
On the flip side of enforcement, there has also been a zealousness among some Canadian crypto companies to be regulated by the OSC and other securities commissions, Mr. Vingoe said. While he said this is entirely welcome, since it means they will be following a tight set of rules to operate in the country, Mr. Vingoe is concerned about crypto companies using regulation as a marketing tactic.
“At the end of the day, there is a lot at stake here,” Mr. Vingoe said. “We know from our own research, which is going to be published later this month, that more than 30 per cent of Canadians plan to buy crypto assets in the next year ... And so certainly, we don’t want the OSC to be the story, but if our actions draw public attention to the risks and opportunities of the crypto sector, the attention serves an important purpose.”