FTX Collapse Fuels Crypto Regulation in Canada
Byline: Hannah Parker
Due to a lack of oversight and outright misconduct in managing user cash, FTX collapsed due to a liquidity crisis. Uneasy investors left FTX after this, causing withdrawals to skyrocket dramatically.
FTX was one of the largest cryptocurrency establishments, and the collapse sparked more desire for regulation than leaving the market; we see this occurring in several nations, including Canada.
Canada to Introduce Regulation
In response to recent developments in the cryptocurrency market, the Canadian Securities Administrators (CSA), according to a statement published in the final quarter of 2022, said it would strengthen its approach to crypto regulation.
The organization, which consists of security regulators from every one of Canada’s 10 provinces and three territories, declared that it would be extending its current rules to include already operational platforms. A recent statement said that it expected all bitcoin businesses operating legally in the country to execute a pre-registration undertaking (PRU) while their applications were being reviewed.
Recent occurrences caused the cryptocurrency industry to lose billions of dollars in value within a year, including the collapse of some of the most well-known crypto businesses and currencies, including crypto lender Celsius and Terra’s algorithmic stablecoin terraUSD (UST).
The CSA “continues to watch and evaluate the presence and role of stablecoins in Canadian capital markets,” the statement reads.
What Regulation Does for Cryptocurrency
Technology is developing at a swift pace. Experts at Bitcode Method suggest that it poses a severe risk since such modifications may eventually make technology—including blockchain—outdated. Given the speed at which technology is developing, cryptocurrency-savvy financial advisors and information infrastructure are needed. Investors can then comprehend the technological risks associated with cryptocurrencies and make wise choices.
Online fraud is a danger associated with cryptocurrency investment. Cyber-attacks are becoming commonplace, and hacking is a big concern on a global scale. Investors who have invested their assets in cryptocurrencies risk a financial loss in the event of a cyber-attack. The government can implement measures to aid bitcoin investors in protecting their money through regulations. Investors can also raise issues or get their money back if they lose it.
Consider Bitcoin: the oldest and most well-known cryptocurrency in the world reached record highs at the start of 2021 before falling sharply and losing a significant portion of its value. Laws must be put in place to protect investors due to the absence of authorized information on these digital assets and the technological challenges they present.
There are countless cryptocurrencies in use today. A handful of investors, however, are only familiar with a select few, including Dogecoin, Ether, Ripple, and Bitcoin. They need to learn about the tens of thousands of additional virtual assets. Therefore, a regulatory body that can provide all information about the performance of digital assets, their hazards, and their potential is needed to clear cryptocurrencies to protect clients.
Any unregulated system has the potential to support illegal activities. A customer due diligence procedure resembling a bank is, therefore, necessary. This can assist in tracking the real identities of customers and confirming their whereabouts when they buy or sell cryptocurrency. Any violation of these standards should result in harsh penalties.
Cryptocurrencies are not secure, even though they have recently become a fantastic means of making money. Every government is concerned about how cryptocurrencies develop and spread to new areas. You must realize that now is unquestionably the best time to determine whether to invest in cryptocurrencies. However, it is essential to comprehend the facts before making a choice. Recently, there has been news about attempts to regulate cryptocurrencies from many parts of the world. Every cryptocurrency a government does not regulate will be outlawed, and each country will introduce its cryptocurrency. It might have beneficial or harmful effects on the entire crypto industry.
Investors, consumers, business people, and regulators are all concerned about the collapse of FTX, which was once among the essential crypto asset exchanges in the world. Previous talks and a signed letter of intent suggested that fellow cryptocurrency exchange Binance would be buying FTX. Soon after, word spread that FTX would be entirely withdrawing from the agreement due to the seriousness of its internal mismanagement. Soon after, the FTX crash sparked a global call for regulating cryptocurrency to safeguard the market and its consumers. While it might take some time before it becomes a worldwide concern, more nations are starting to move in that direction.
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