Casey Wagner

<div id="highlights-block_6259da4816b6d" class="highlights">
 <ul>
 <li>WonderFi announces plans to purchase second crypto exchange in Canada, which will give it a 33% market share </li>
 <li>The teams expect the regulatory approval process to move quickly after its last acquisition set a precedent</li>
 </ul>
 
</div>



A month after closing its last deal, Canada-based decentralized finance company WonderFi Technologies has announced plans to purchase Coinberry, another regulated cryptocurrency exchange. 



WonderFi has entered a definitive agreement to purchase <a href="https://www.coinberry.com/" target="_blank" rel="noreferrer noopener">Coinberry</a> for $25.54 million. The exchange, founded in 2017, currently services over 220,000 Canadian clients and has posted over $1 billion in transactions to date.&nbsp;



“We have a shared belief with WonderFi that seamless integration and unified access to digital assets is the future and where we want to be positioned,” said Coinberry CEO and Founder, Andrei Poliakov.



<blockquote class="wp-block-quote">“We chose this route for Coinberry because we felt it was the best thing for our loyal Canadian users and this merger will give users access to the best prices, the best products, and the best service.”   </blockquote>



In March, WonderFi <a href="https://cms.blockworks.co/wonderfi-announces-closing-of-bitbuy-acquisition-overcoming-regulatory-hurdles/" target="_blank" rel="noreferrer noopener">closed its acquisition</a> of First Ledger Corp, the parent company of Bitbuy Technologies, after first announcing plans to purchase the exchange in January. Regulatory hurdles were behind the delay, as it marked the first time in Canadian history that every provincial regulator had to approve a change of control where a publicly traded company, WonderFi, was acquiring an approved crypto entity, said Ben Samaroo, CEO of WonderFi.&nbsp;



The Coinberry purchase is subject to the same regulatory approval process, but the teams expect this process to move faster this time.&nbsp;



“WonderFi set a precedent with the acquisition of Bitbuy as it was the first acquisition of a licensed crypto platform in Canada,”  said Samaroo.



<blockquote class="wp-block-quote">“As we have now carved the path for this type of acquisition, we expect that the Coinberry deal will achieve regulatory approval on a shorter timeline.” </blockquote>



Once the deal is finalized, WonderFi will own two out of the six registered cryptocurrency trading platforms in Canada, putting it at a 33% market share.&nbsp;



“WonderFi’s management team continues to execute on accretive acquisitions, and this is an extremely important one, because it shows the speed and vision behind WonderFi’s plan,” said Kevin O’Leary, an entrepreneur and WonderFi advisor and investor. “Compliant access to crypto is what matters, and WonderFi has quickly established itself as a leader in Canada. Next stop, global.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

WonderFi Continues to Consolidate Canadian Market With Second Acquisition￼

Sam Reynolds

<div id="highlights-block_6140d1b68a0b4" class="highlights">
 <ul>
 <li>SEC Chairman Gary Gensler appeared before the Senate Banking Committee Tuesday </li>
 <li>Gensler said that more retail investors today are accessing the market than ever before, and there needs to be adequate resources for the SEC to protect investors</li>
 </ul>
 
</div>



United States Securities and Exchange Commission Gary Gensler has big plans to shake up how Wall Street firms and the digital asset industry conduct business.&nbsp;



<a href="https://www.banking.senate.gov/imo/media/doc/Gensler%20Testimony%209-14-21.pdf">In prepared remarks</a> during his testimony before the Senate Banking Committee Tuesday, Gensler said that emerging technologies pose risks to investors, and regulators cannot continue to look the other way.&nbsp;



<blockquote class="wp-block-quote">“We just don’t have enough investor protection in crypto finance, issuance, trading, or lending,” Gensler said. “Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications.”</blockquote>



Gensler said that more retail investors today are accessing the market than ever before. There needs to be adequate resources for the SEC to protect investors, Gensler said, mentioning that the SEC’s staff has decreased 4% since 2016.&nbsp;



Senators have been divided over how to best address the growing cryptocurrency industry and increasing prominence of retail investors in the space.&nbsp;



“In my mind, the SEC’s job is not to make retail investing more expensive or unpleasant or difficult,” said Sen. Pat Toomey (R-PA). “In America, adults investing their own money should be free to decide how to do so.”&nbsp;



During the committee meeting, Sen. Elizabeth Warren (D-Mass.) pressed Gensler on Ethereum&#8217;s high gas fees which she said impact small investors. &#8220;In the face of these high, unpredictable fees, small investors can easily get jammed and wiped out entirely,&#8221; she said, adding, &#8220;Advocates say crypto markets are about financial inclusion but the people who are most economically vulnerable are the ones who are the ones who are going to have to withdraw their money the fastest when the market drops. Does this sound like the path to financial inclusion to you?&#8221;



As such she said regulators need to step up and ensure they are building the &#8220;inclusive financial system that we need.&#8221; 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Senator Warren and <a href="https://twitter.com/GaryGensler?ref_src=twsrc%5Etfw">@GaryGensler</a> chit chatten about <a href="https://twitter.com/hashtag/Ether?src=hash&amp;ref_src=twsrc%5Etfw">#Ether</a> gas prices! <a href="https://twitter.com/hashtag/crypto?src=hash&amp;ref_src=twsrc%5Etfw">#crypto</a><a href="https://twitter.com/digitalassetbuy?ref_src=twsrc%5Etfw">@digitalassetbuy</a> <a href="https://twitter.com/BakkupBradley?ref_src=twsrc%5Etfw">@BakkupBradley</a> <a href="https://twitter.com/WorkingMoneyCH?ref_src=twsrc%5Etfw">@WorkingMoneyCH</a> <a href="https://twitter.com/jungleincxrp?ref_src=twsrc%5Etfw">@jungleincxrp</a> <a href="https://twitter.com/sentosumosaba?ref_src=twsrc%5Etfw">@sentosumosaba</a> <a href="https://twitter.com/XRPNews_?ref_src=twsrc%5Etfw">@XRPNews_</a> <a href="https://twitter.com/Kevin_Cage_?ref_src=twsrc%5Etfw">@Kevin_Cage_</a> <a href="https://twitter.com/MoonLamboio?ref_src=twsrc%5Etfw">@MoonLamboio</a> <a href="https://twitter.com/thebearablebull?ref_src=twsrc%5Etfw">@thebearablebull</a><a href="https://twitter.com/JohnEDeaton1?ref_src=twsrc%5Etfw">@JohnEDeaton1</a> <a href="https://twitter.com/attorneyjeremy1?ref_src=twsrc%5Etfw">@attorneyjeremy1</a> <a href="https://twitter.com/AttorneySeal1?ref_src=twsrc%5Etfw">@AttorneySeal1</a> <a href="https://twitter.com/FilanLaw?ref_src=twsrc%5Etfw">@FilanLaw</a> <a href="https://twitter.com/CryptoLawUS?ref_src=twsrc%5Etfw">@CryptoLawUS</a> <a href="https://t.co/fmxJnToOo1">pic.twitter.com/fmxJnToOo1</a>&mdash; Jeff (@ISO_XRP) <a href="https://twitter.com/ISO_XRP/status/1437808580644642817?ref_src=twsrc%5Etfw">September 14, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



During his remarks Gensler mentioned that <a href="https://cms.blockworks.co/the-sec-will-sue-coinbase-if-it-launches-lend/" target="_blank" rel="noreferrer noopener">Coinbase</a> is not a registered entity, despite the fact that it lists “dozens of tokens that might be securities.&#8221;&nbsp;



Coinbase’s lack of registration is an anchor on a company that otherwise has a market value of being a registered and compliant entity. The exchange also operates in Canada, and does not have a registration there either, according<a href="https://info.securities-administrators.ca/nrsmobile/nrssearch.aspx" target="_blank" rel="noreferrer noopener"> to records </a>from the Canadian Securities Administrators.&nbsp;



In a recent <a href="https://cms.blockworks.co/is-a-regulatory-fight-over-crypto-lending-brewing-in-canada/" target="_blank" rel="noreferrer noopener">interview</a> with Blockworks, Andrei Poliakov, the CEO of one of Canada’s only licensed exchanges Coinberry, said that lack of registration would be problematic for exchanges as they trade contracts for delivery — most users on exchanges don’t custody their own assets.&nbsp;



“Coinbase trades securities — like us. They trade contracts for delivery. You’re buying a promise from us that you can withdraw the crypto when you want it,” he said. “There’s an underlying asset that’s not a security that supports the contract, but at the end of the day it’s a security.”



“Investors get to decide what risks they take, that’s up to investors,” said Gensler. “But Congress said that it should be based on full and fair disclosure.”



This story was updated on Sept. 14, 2021, at 1:31 pm ET.



Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.

Gensler: Investors are Not Protected When It Comes to Crypto

<div id="highlights-block_613a8f3515c64" class="highlights">
 <ul>
 <li>Licensed exchange Coinberry has had preliminary discussions with the Ontario Securities Commission over crypto lending.</li>
 <li>In Canada, securities regulation is a provincial affair, and the addition of any new products to a licensed exchange would need to get the approval of nearly a dozen regulators</li>
 </ul>
 
</div>



Licensed Canadian crypto exchange Coinberry doesn’t have immediate plans to launch lending products in Canada, but CEO Andrei Poliakov said he is having preliminary discussions with the Ontario Securities Commission on the matter.&nbsp;



“I&#8217;m very interested to see how this evolves because ultimately this will also play into how the OSC in Canada looks at the lending business as a whole because there are platforms in Canada that are not registered that are offering this,” Poliakov said in an interview with Blockworks. “We’ve had preliminary discussions with the OSC about this.”



Complicating Coinbase’s affairs in the US is that its lending products are very much a security, according to Poliakov.



“Coinbase trades securities — like us. They trade contracts for delivery. You’re buying a promise from us that you can withdraw the crypto when you want it,” he said. “There’s an underlying asset that’s not a security that supports the contract, but at the end of the day it’s a security.”



Which is not a problem for Coinberry because they <a href="https://cms.blockworks.co/canadas-coinberry-gets-securities-regulatory-greenlight/" target="_blank" rel="noreferrer noopener">registered</a> with the OSC to do just that, trade securities.&nbsp;&nbsp;



Ultimately it’s an arguable case whether or not lending can be considered a registerable activity or not, as the underlying asset — bitcoin or ether — isn’t a security but rather a commodity, “but this is all an argument for the lawyers to make,” he explained.



The inherent problem, Poliakov argued, is that Coinbase went ahead with preparing the product anyway and putting users on a waiting list even though the SEC signalled that it wasn’t comfortable with the product.&nbsp;&nbsp;&nbsp;



“What did you expect the SEC to do? They literally just told them not to do it and they went ahead and now they&#8217;re going to do it in October. So I&#8217;m not surprised that the SEC is coming back and taking a more forceful position again,” Poliakov said. So what’s the pathway to getting a lending product created in Canada?&nbsp;



The first step would be bringing it to the OSC. Once it&#8217;s approved in Ontario, Coinberry would need to take it to securities regulators in the country’s other nine provinces and three territories via the Canadian Securities Administration, a nationwide alliance of provincial securities regulators that acts as a vehicle for national regulation and harmonization.



Unlike the US, in Canada securities regulation is squarely a provincial affair: both liberal and conservative governments have been in favor of a national regulator akin to the SEC, though the country’s courts have previously decided twice that it’s a provincial matter.



“It&#8217;s not like the OSC decides something and everybody just agrees. At any point, any province could have opted out,” Poliakov said, recalling how Coinberry’s initial application took three years before the OSC and the CSA were comfortable with Coinberry’s custody, control mechanisms and insurance. QuadrigaCX&nbsp; — <a href="https://globalnews.ca/news/7058598/collapse-of-quadriga-cx-fraud/" target="_blank" rel="noreferrer noopener">a scandal</a> that involved its CEO taking the exchange’s keys to the grave&nbsp; — was clearly still on the minds of regulators.



“Everyone is happy when everything works, but when things break down and you have the Quadrigas happen, everyone says to regulators ‘why weren&#8217;t you overseeing this?’” said&nbsp; Poliakov.&nbsp;&nbsp;



As a result, creating a crypto lending product properly, with the requisite regulation, would simply take time, especially since, according to Poliakov, Coinberry’s business model is to always move in alignment with regulators — even if it&#8217;s a long drawn-out process, he added.



Are you a UK or EU reader that cant get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.

Is a Regulatory Fight Over Crypto Lending Brewing in Canada?

<div id="highlights-block_6123d50142e5f" class="highlights">
 <ul>
 <li>Coinberry gets OSC approval and subsequent national greenlight from the Canadian Securities Administrators (CSA) to operate in all provinces and territories </li>
 <li>Coinberry is the second exchange to get approval after Wealthsimple</li>
 </ul>
 
</div>



Toronto-based Coinberry announced today that it has become a registered securities dealer by the Ontario Securities Commission, and with this provincial registration, national registration from the Canadian Securities Association.&nbsp;



This makes Coinberry the second crypto platform to attain registration, after Wealthsimple — an online stock broker and neobank that recently expanded into crypto.&nbsp;&nbsp;&nbsp;



&#8220;Coinberry has been working hard with our partners at DLA Piper to ensure that we meet the regulatory requirements that have been presented,” CEO Andrei Poliakov said in a statement. &#8220;Canadians have been seeking a safe, trustworthy, and regulated platform to acquire crypto assets for far too long. We are finally thrilled to offer them one.&#8221;



<a href="https://www.securities.io/the-canadian-crypto-landscape-is-about-to-change-heres-how-investors-can-prepare/">In a prior interview,</a> Poliakov said Coinberry had spent nearly two years working with regulators to ensure the trading platform is fully regulatory compliant.



In Canada, securities registration is a provincial matter. As Ontario is the country’s largest province, and home to the financial capital of Toronto, the OSC is the nation’s most influential regulator. Both liberal and conservative governments have been in favor of a national regulator akin to the SEC, though the country’s <a href="https://financialpost.com/fp-finance/flahertys-dream-of-a-national-securities-regulator-a-victim-of-friendly-fire">courts have decided</a> that securities are squarely in the purview of the Provinces squashing this move for now.&nbsp;



But until then, Canada has the Canadian Securities Administrators, a nationwide alliance of provincial securities regulators that acts as a vehicle for national regulation and harmonization. Coinberry has also been approved for nationwide registration via the CSA, allowing it to market itself to Canadians nationwide.&nbsp; Newton, Coinsquare and NDAX, three of the other large exchanges in the country, have not been granted registration by the OSC or CSA.



In 2020, Coinsquare was <a href="https://www.financemagnates.com/cryptocurrency/regulation/coinsquare-admits-market-manipulation-in-settlement-with-osc/">disciplined by the OSC </a>for wash trading, a practice where exchange volume is inflated via fake liquidity. According to a statement at the time from the OSC, Coinsquare was manipulating 90% of the reported trading volume on its platform. As a result, its founder and CEO resigned from the company and Coinsquare was forced to pay $2.2 million in penalties.



Want more investor-focused content on digital assets? <a href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" target="_blank" rel="noreferrer noopener">Join us</a> September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. <a href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" target="_blank" rel="noreferrer noopener">Buy it now</a>.