Ontario SEC wants to kick crypto ass and take names

Seychelles-based crypto exchange KuCoin — which first emerged in September 2017 -- is the next target for Ontario's answer to the SEC.

The Ontario Securities Commission (OSC) sets its sights on a second crypto exchange last week, alleging that long-serving platform KuCoin failed to comply with local securities laws.

The Canadian financial regulator called a hearing to decide whether to force KuCoin’s operators — Mek Global (Seychelles) and PhoenixFin (Singapore) — to take their securities and derivatives trade out of Ontario altogether.

In March, the OSC warned crypto exchanges listing securities and derivatives must register with the watchdog before April 19. KuCoin failed to meet that deadline.

“Entities such as KuCoin, which flout this compliance process, expose Ontario investors to unacceptable risks and create an uneven playing field within the crypto asset trading platform sector,” said the OSC in a statement.

KuCoin faces a temporary or complete ban on securities trading in Ontario.
The OSC also wants the revenue generated from securities and derivatives during non-compliance.
The exchange could pay up to CAD$1 million ($823 million) in fines.

The OSC is also pushing to recover costs of its investigation directly from KuCoin.

KuCoin and Poloniex, kindred spirits

In May, Ontario’s securities regulator filed almost exactly the same allegations against Seychelles-based crypto exchange Poloniex.

Like KuCoin, the OSC said Poloniex failed to make contact.

At the time, the Globe and Mail reported just one entity offering crypto derivatives and securities to Ontarians had successfully registered — Toronto millennial bank Wealthsimple.

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The regulations on securities in Ontario are some of the strictest in the world and one of the few jurisdictions that has shown a willingness to take action against offshore entities.
— Adam Cochran (@adamscochran) June 8, 2021

“It was, for a while, unclear if the Canadian regulators would push for compliance on offshore exchanges. Now that this has changed, every exchange needs to ask themselves what their strategy is for Canada,” tweeted analyst Adam Cochran.

Poloniex was founded in 2014 while KuCoin emerged in September 2017. Bitcoin reached its historic $20,000 then-peak three months later.

The OSC set Poloniex’ hearing for June 18 while KuCoin’s is scheduled for July 6.

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