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Canada is Planning to Restrict Cryptocurrency Short Selling

Mar 22, 2019

Canadian financial regulatory authorities are currently developing new rules for cryptocurrency exchanges within the country. The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) announced a new framework for cryptocurrencies exchanges that would terminate short selling and margin trading of digital assets The development of the above-mentioned framework follows the scandal and the death of chief executive officer of QuadrigaCX, Canada’s largest cryptocurrency exchange. Gerald Cotton, the deceased CEO, was supposedly the only one who had access to cold wallets which held $250 million of customers funds.

The CSA and the IIROC have registered a joint consultation paper, called Proposed Framework for Crypto-Asset Trading Platforms last Thursday, looking for input from the fintech community on how regulatory requirements can be developed for cryptocurrency platforms. The regulators highlighted their main concerns at the beginning of the document:

"Although DLT may provide benefits, global incidents point to crypto assets having heightened risks related to loss and theft as compared to other assets."

If the framework is approved, it will probably cause a huge disturbance amid cryptocurrency traders, mostly due to the proposition to strip them off the two widely used trading instruments, namely, short selling and margin trading. Removing of the aforementioned instruments would essentially limit traders to only execute regular spot trades.

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