As QuadrigaCX remaining authorities are busy in court, the death of their CEO has now led to Canadian authorities proposing a ban. The two firms at the center of the ban proposal, are Investment Industry Regulatory Organization and the Canadian Securities Administration.
The latter two have released a joint report in which they are proposing placing a ban on Margin trading and Short Selling citing risks involved as the primary concern behind their ban suggestion. While the report is up for debate and comments from the public if it’s approved, crypto enthusiasts will only be left with one choice to go long and maximize their earning when the price goes up. The report starts by acknowledging that DLT is beneficial to the participants; however, the heightened risks evident in several incidences across the globe depict the theft and losses crypto users are exposed to. In a bid to reduce the risks, the two entities propose placing a ban on short selling activities also known as dark trading and margin trading.
Traders on the Losing End
If the proposal gets approved, the crypto community in Canada will be up in arms having been left with only one option when it comes to trading. Margin trading involves getting funds from a broker to make investments in digital assets. On the other hand, dark trading is capitalizing on the bearish trends to generate revenue when the prices are on a downward trajectory.
Alongside the above reason for the ban, the entities also made their decision basing on the QuadrigaCX situation where according to them the lack of protection on custody of the assets led to the loss of digital assets worth $250 million. According to the report;-
“Due to the platforms having control over their investor’s assets in this case being the only holder of the private keys, this exposes the investors to unseen risks. The funds lack protection and accounting is also insufficient, and since all funds are bundled together, the losses are significant in case of theft.”
From their explanation, it seems the two entities are setting plans in motion to get the exchanges placed under further oversight. According to the report, the crypto exchanges seeking to register their firms as investment dealers will be required to use a third-party platform for custody of their digital assets. Moreover, they will be needed to fulfill custody requirements in place together with complying with future regulations.