Canadian Regulator Fines Bybit, KuCoin For Securities Law Violations

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  • “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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  • Shali­ni Nagarajan

    Block­works

    Reporter

    Shali­ni is a cryp­to reporter from Ban­ga­lore, India who cov­ers devel­op­ments in the mar­ket, reg­u­la­tion, mar­ket struc­ture, and advice from insti­tu­tion­al experts. Pri­or to Block­works, she worked as a mar­kets reporter at Insid­er and a cor­re­spon­dent at Reuters News. She holds some bit­coin and ether. Reach her at [email pro­tect­ed]

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