Canadian Regulator Fines Bybit, KuCoin For Securities Law Violations
The Ontario Securities Commission said foreign cryptoasset trading platforms must play by the rules, or face enforcement action
Nathan Phillips square, near the OSC, Toronto, Canada; Source: Paolo Costa Baldi, CC BY-SA 3.0, via Wikimedia Commons
key takeaways
- “Unlike KuCoin, Bybit responded to the OSC’s enforcement action,” the OSC said
- KuCoin is barred from operating in Ontario, while Bybit continues to work on registration
The Ontario Securities Commission (OSC) has hit two foreign cryptocurrency exchanges with enforcement actions after finding they failed to comply with securities laws there. KuCoin has been banned from operating in the Ontario province, while Bybit agreed to pay a fine as it works with the authority to register appropriately.
“Bybit and KuCoin both operate unregistered cryptoasset trading platforms and allowed Ontario investors to trade securities without a prospectus or any exemption from the prospectus requirements,” the regulator said in a statement on Wednesday.
KuCoin, based in Seychelles, has been ordered to pay an administrative penalty of about C$2.1 million ($1.6 million), including investigative charges. Meanwhile, Singapore-based Bybit has reached a settlement with the regulator for about $2.5 million.
“Foreign cryptoasset trading platforms that want to operate in Ontario must play by the rules or face enforcement action,” Jeff Kehoe, OSC’s enforcement director, said.
Bybit has agreed to continue working with the OSC to register its platform. In the event that registration talks fail, the exchange will close its operations with Ontario, the regulator said.
“Unlike KuCoin, Bybit responded to the OSC’s enforcement action, maintained an open dialogue, provided requested information, and committed to engaging in registration discussions,” the regulator said.
Existing Bybit retail customers in Ontario will be asked to close their positions in some restricted products involving leverage, margin or the extension of credit. The exchange told Blockworks this week it’s looking to cut employee headcount by removing overlapping functions.
The penalties come a little more than a year after the Canadian regulator warned exchanges operating in Ontario to contact the OSC by April 19, 2021 for registration or face enforcement action.
“Despite this warning, Bybit and KuCoin did not contact the OSC by the deadline and continued operations in Ontario,” the regulator said.
Authorities have been keeping a closing eye on cryptocurrency products as interest grows in the relatively nascent investment space. Earlier this year, crypto lender BlockFi agreed to pay $100 million in penalties to the Securities and Exchange Commission over allegations it illegally offered a high-interest yield product.
The rulings could lead to hesitation among North American investors to invest in cryptoassets as a result of the jurisdiction’s harsh regulatory framework, according to Sheraz Ahmed, managing partner at STORM Partners.
He thinks the exchanges themselves won’t be too concerned about financial penalties, as they have been operating successfully for years. “Fines are always preferable to complete bans, and sometimes it is better to ask for forgiveness than permission,” he said.
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