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LiquiTrade Found Guilty of Illegally Operating Exchange in Canada

Ruholamin Haqshanas
Last updated: | 2 min read
LiquiTrade Found Guilty of Illegally Operating Exchange in Canada

LiquiTrade, the operator of the Latoken crypto exchange, has been found guilty of illegally operating an exchange in Canada by a panel established by the British Columbia Securities Commission (BCSC).

The accusations against LiquiTrade initially surfaced in November 2022 when it was alleged that the company had violated Canada’s Securities Act by facilitating daily transactions worth $300 million for its 1.5 million user base.

After nearly two years of investigation, the BCSC panel reached a verdict, stating that LiquiTrade had indeed violated Canadian securities legislation.

The panel claimed that LiquiTrade had never been registered under the Act and that there was no recognized exchange or clearing agency in British Columbia operated by LiquiTrade or under the name LATOKEN.

LiquiTrade Operated an Unauthorized Exchange

The panel further revealed that LiquiTrade allowed users to trade contractual rights of underlying crypto assets, which were considered derivatives investments.

Consequently, LiquiTrade was required to be registered under the Securities Act before legally facilitating contract trading in Canada, specifically in British Columbia.

The BCSC panel also found that LiquiTrade was operating as an unauthorized exchange, a clear violation of the Act.

In Canada, several crypto exchanges have faced regulatory scrutiny, with LiquiTrade joining the list of banned platforms that includes Catalyx, KuCoin, Poloniex, and exchange.

However, there are also 15 authorized crypto trading platforms operating in the region, including prominent names like Bitbuy, Coinbase, and Fidelity.

Sanctions against LiquiTrade are expected to be imposed by August 14, and they could range from monetary penalties to a complete ban on services.

Meanwhile, several crypto firms pulled out of the country last year citing growing regulatory scrutiny in the country.

In October, Binance, the world’s largest crypto exchange, said that it was withdrawing from Canada due to new guidance about stablecoins and limits to investors.

Likewise, OKX revealed in March revealed that it’s exiting the Canadian market, blaming new regulations for the departure.

Other notable exits from Canada include Bybit, Paxos, dYdX, and Bittrex.

Canada Takes Harsh Stance Against Crypto Companies

Canadian Securities Administrators in February 2023 introduced new rules mandating crypto firms to make commitments to protect investors through “an enhanced pre-registration undertaking.”

Under the CSA’s “pre registration undertakings,” firms have to agree to segregation in crypto custody, and they must have a chief compliance officer on staff.

They must also eliminate leveraged trading and not allow users to trade or hold stablecoins.

However, not all exchanges have exited the country, with some committed to succeeding in a regulated Canadian market.

As reported, Coinbase has appointed a former executive from Shopify as its new country director in Canada as part of its strategy to adjust to the evolving regulatory landscape in the country.

Meanwhile, earlier this year, the Canadian Anti-Fraud Centre (CAFC) warned about a surge in crypto scams targeting Canadian citizens.

In response to this concerning trend, the CAFC, in collaboration with the Canadian Investment Regulatory Organization (CIRO), has issued a warning to raise awareness about these sophisticated scams, particularly those involving prolonged online communication.