Ontario issues warning over crypto trading platform Binance

The Ontario Securities Commission is warning investors that cryptocurrency platform Binance – one of the world’s largest – is unregistered in Ontario, meaning it’s not authorized to sell any derivatives or securities in the province.

The OSC’s announcement Thursday was prompted by what the commission says was a message this week from Binance to its customers suggesting it would continue to operate in Canada, despite previously saying it would pull out of Ontario rather than face regulation.

“Binance represented to OSC Staff that no new transactions involving Ontario residents would occur after December 31, 2021,” the OSC said in a news release. “Binance has issued a notice to users, without any notification to the OSC, rescinding this commitment. This is unacceptable.”

The OSC says unregistered platforms operating in Ontario may be subject to action – including temporary orders – to ensure compliance, which could affect the platforms’ continuing local business operations.

Binance told users in June it would cease operations in Ontario after opting not to become registered as a regulated crypto trading platform with the OSC. In a blog post to account holders, the Cayman Islands-based crypto exchange said Ontario would become a “restricted jurisdiction” and advised Ontario-based users to close their accounts by Dec. 31.

However, on Dec. 26, Binance founder and chief executive officer Changpeng Zhao tweeted a link to the company’s Christmas Eve registration of Calgary-based Binance Canada Capital Markets Inc. with FINTRAC (the federal Financial Transactions and Reports Analysis Centre of Canada) as a money-services business.

A voicemail and text to the Calgary phone number listed on Binance’s FINTRAC registration were not immediately returned Thursday. Also, a LinkedIn message to the chief risk officer of Binance’s U.S. division was not immediately returned.

Binance’s messages led crypto-focused media to report this week that the company would continue to operate in Canada. Forbes reported “Binance Gains Regulatory Approvals In Bahrain And Canada To Provide Crypto Services.”

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CoinDesk, in a story headlined Binance to Continue Operating in Ontario After Cooperating With Canadian Regulators, quoted a Binance message to customers as saying: “As a result of ongoing and positive co-operation with Canadian regulators, Binance in Canada has been successful in taking its first steps on the regulatory path. … This [FINTRAC] registration allows us to continue our operations in Canada and resume business in Ontario while we pursue full registration.”

Binance has come under scrutiny from regulators around the globe. The Dutch central bank said in August that Binance was not in compliance with its anti-money laundering and anti-terrorist financing laws. Regulators in Japan, Britain, Germany, Italy, Hong Kong and Malaysia also issued warnings against Binance this year.

Globally, more than US$2-trillion is now invested in crypto assets, greater than the total amount managed by Canadian mutual funds and exchange-traded funds. Gary Gensler, a crypto expert who now runs the U.S. Securities and Exchange Commission, launched a media campaign late in the summer to warn investors that the industry is “rife with fraud, scams and abuse.”

This past 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.

As part of that, the OSC said platforms that offered their services to Ontarians would be subject to regulation, regardless of where they are based. The OSC warned platforms that they must contact OSC staff by mid-April to discuss how to bring their operations into compliance, or face potential regulatory action.

There are now six crypto asset trading platforms registered in Ontario: Weathsimple, Coinberry, Netcoins, Coinsmart, Fidelity and Bitbuy.

With files from Tim Kiladze, Vanmala Subramaniam and Reuters

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