LiquiTrade, the company behind the Latoken crypto exchange, has been found guilty of unlawfully operating an exchange in Canada by a panel established by the British Columbia Securities Commission (BCSC).
The allegations against LiquiTrade first arose in November 2022, when it was claimed that the company had violated Canada’s Securities Act by facilitating daily transactions worth $300 million for its user base of 1.5 million.
After an investigation lasting almost two years, the BCSC panel reached a verdict, stating that LiquiTrade had indeed breached Canadian securities legislation.
According to the panel, LiquiTrade had never been registered under the Act, and there was no recognized exchange or clearing agency in British Columbia operated by LiquiTrade or under the name LATOKEN.
The panel also revealed that LiquiTrade allowed users to trade contractual rights of underlying crypto assets, which were considered derivative investments. As a result, LiquiTrade was required to be registered under the Securities Act before legally facilitating contract trading in Canada, particularly in British Columbia.
The BCSC panel further found that LiquiTrade was operating as an unauthorized exchange, which was a clear violation of the Act.
LiquiTrade now joins the list of banned platforms in Canada, including Catalyx, KuCoin, Poloniex, and xt.com exchange, that have faced regulatory scrutiny.
However, there are still 15 authorized crypto trading platforms operating in the region, including well-known names such as Bitbuy, Coinbase, and Fidelity.
Sanctions against LiquiTrade are expected to be imposed by August 14, and they could range from monetary penalties to a complete ban on services.
Last year, several crypto firms withdrew from Canada due to increased regulatory scrutiny in the country. Binance, the world’s largest crypto exchange, announced in October that it was pulling out of Canada because of new guidance on stablecoins and investor limits. Similarly, OKX revealed in March that it was exiting the Canadian market, citing new regulations as the reason for its departure.
Other notable departures from Canada include Bybit, Paxos, dYdX, and Bittrex.
Canada has taken a tough stance against crypto companies. In February 2023, the Canadian Securities Administrators introduced new rules requiring crypto firms to commit to protecting investors through “enhanced pre-registration undertakings.”
Under these undertakings, firms must agree to segregate crypto custody, have a chief compliance officer on staff, eliminate leveraged trading, and prohibit the trading or holding of stablecoins.
Despite these regulations, some exchanges remain committed to succeeding in the regulated Canadian market. Coinbase, for example, has appointed a former executive from Shopify as its new country director in Canada, as part of its strategy to adapt to the evolving regulatory landscape in the country.
Earlier this year, the Canadian Anti-Fraud Centre (CAFC) issued a warning about a rise in crypto scams targeting Canadian citizens. In response, the CAFC, in collaboration with the Canadian Investment Regulatory Organization (CIRO), has issued a warning to raise awareness about these sophisticated scams, particularly those involving prolonged online communication.