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  • The Ontario Securities Commission is alleging that crypto exchange Poloniex disregarded securities law in the province.
  • The regulator claims that the firm failed to comply with the registration requirements for digital asset exchanges.
  • Poloniex could face a 1 million Canadian dollar fine and awaits the first hearing on the matter next month.  

The securities regulator in Canada’s most populated province has alleged that cryptocurrency exchange firm Poloniex has violated securities law.

Crypto derivatives may be classified as securities

The Ontario Securities Commission (OSC) claimed that Poloniex, based in Seychelles, has not registered as a crypto trading platform.  

Previously, the OSC warned digital asset exchanges that trade securities and derivatives in the province to get in contact with the regulator. The agency further alerted that the consequence of failing to do so could result in “potential regulatory action.”

Exchanges had a deadline set on April 19 to comply with the registration requirements and was given the notice that these firms were subject to securities regulation.  

Following the announcement, over 70 exchanges have had compliance discussions with the regulator, while most were foreign companies. However, Poloniex did not take part in this process.  

The OSC filed a statement of allegations against the crypto exchange, accusing Poloniex of “disregarding Ontario securities law.”

The enforcement action could suggest further implications for digital asset trading platforms in the country, as the regulator aims to hold the firm “signal that crypto asset trading platforms flouting Ontario securities law will face regulatory action.” The statement reads:

Poloniex is subject to Ontario securities law because crypto asset products offered on the Poloniex Platform are securities and derivatives. Poloniex has nonetheless failed to comply with the registration and prospectus requirements under Ontario securities law.

The Canadian regulator identifies Poloniex’s crime as holding assets in custody as a third party and even argued that any assets held on a trading platform could be securities. The agency further explained:

While Poloniex purports to facilitate the trading of the crypto assets in its investors’ accounts, in practice, Poloniex only provides its investors with instruments or contracts involving crypto assets. These instruments or contracts constitute securities and derivatives.

Currently, the OSC is requesting 1 million Canadian dollars as a fine for each “failure to comply.” The hearing is scheduled for June 18.