Tired of those cryptocurrency ads that have all the grace and subtlety of carnival barkers or neon signs on the Vegas Strip? The same goes for securities regulators.
The Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada (IIROC) on Thursday announced new advertising, marketing and social media guidelines for cryptocurrency exchanges.
Ontario Securities Commission Chairman Grant Vingoe said the goal of the guidelines is simple: to keep investors safe in a rapidly growing industry with a Wild West atmosphere.
âThe main goal is investor protection,â Vingoe said.
Those âfastest one to 500 trades gets a bonusâ ads or âclick here and invest before the price goes upâ tweets? Big no-no. Ditto for those who say that an exchange is the safest, without any proof. Most importantly, any advertisement should mention the volatility and risk inherent in the entire cryptocurrency industry.
âThe fact that with one click you can open your account and then have made a speculative investment on the second click is worrying,â Vingoe said. “The use case of cryptocurrencies as payment systems has largely collapsed and they have become speculative investments.”
The amount of money invested worldwide in cryptocurrencies such as bitcoin reached $ 2 trillion in April, more than the total value of Canadian mutual funds and exchange-traded funds, pointed out. Vingoe.
âIt’s fair to assume that it has grown significantly since then,â Vingoe said.
Along with the advertising guidelines, the CSA (which includes provincial and territorial regulators like the Ontario Securities Commission) and IIROC have warned that cryptocurrency exchanges must keep records of all communications with potential customers, including on social media.
The new guidelines have been applauded by investor rights advocates, lawyers and even some cryptocurrency exchanges who want more regulation to help give more credibility to the rapidly growing investment industry.
âThis is to protect retail investors. People who invest in cryptocurrency tend to be younger and tend to be more comfortable communicating on social media, âsaid Jean-Paul Bureaud, executive director of FAIR Canada, an advocacy group. investor rights.
While ensuring that particular investments are suitable for a client is something registered stockbrokers must do, it rarely happens in the world of casino-style advertisements and tweets, Bureaud said. This is a key issue that the guidelines are addressing, he added.
âThey think things over deeper and get closer to the root of the problem,â Bureaud said.
âThis will take out some of the bad players,â said Mitchell Demeter, president of British Columbia-based Netcoins, one of the largest cryptocurrency exchanges based in Canada. âInvestment decisions should be based on education to trust, not emotion or fear of missing out. “
Demeter said introducing more regulations would actually be good for the long-term future of the cryptocurrency boom.
âThis will help make investors more confident in the industry, and I think that’s a good thing,â said Demeter, who added that Netcoins is still considering becoming a fully regulated securities broker, under the jurisdiction of the BC Securities Commission.
Matthew Burgoyne, head of cryptocurrency practice at Calgary-based McLeod Law, said the new guidelines are a good attempt to bring some order to the industry.
But he questions whether they will be effective with cryptocurrency exchanges operating thousands of miles from their Canadian clients, just as he questions the effectiveness of the OSC’s ongoing enforcement actions against exchanges. offshore crypto.
âConsumers will go to the apps they prefer, if they have a more enjoyable experience. Regulators are in a difficult situation. They are definitely damned if they do, damned if they don’t, âsaid Burgoyne.
Yet having at least a few exchanges by the rules gives consumers a choice. And it’s a choice that securities regulators hope to make clear, Vignoe said.
âWhen you have good players who have entered the regulatory system, they should really be seen as a separate category. It’s not fair to paint the whole area with the same brush, âsaid Vignoe.