Regulation

Canada bans leveraged crypto trading

Canada bans leveraged crypto trading

Table of Contents

Canada is set to prohibit crypto firms from offering leveraged trading to its citizens. 

The decision was explained on the Canadian Securities Administrators (CSA) website, where it was stated that these activities should not be allowed as they are considered “high-risk, speculative investments.” This means that firms will no longer be able to offer leveraged trading of cryptocurrencies to Canadians.

The announcement by the CSA is the latest in a string of measures taken to protect investors from the perceived volatile nature of cryptocurrencies. In the past, the agency has cracked down on crypto firms offering services such as margin trading, which allow customers to borrow money to speculate on the price of digital coins.

The new rule is intended to prevent customers from taking on more risk than they can handle. It also serves to protect against possible issues, which can occur when customers are not aware of the potential losses they may incur when investing in leveraged trading.

Overall, this move could be seen to have a positive effect on crypto retail traders in Canada. By limiting the risk involved with leveraged trading, the CSA could be seen to be helping to protect these investors from potential losses, but on the other hand, some might see this as a Big Brother type move.

Stablecoins ban?

The CSA also gave the view that stablecoins “may constitute securities, and/or derivatives”. Therefore registered or pre-registration undertaking (PRU) trading platforms are reminded that they are prohibited from allowing Canadian citizens to trade or have any exposure to such an asset.

Opinion

It would certainly be the case that many retail investors have taken some heavy losses due to leverage trading. Such a strategy is assuredly best undertaken by those traders who are experienced in this area.

However, the sheer level of regulation that is in place, or that is coming into effect in many countries in the near future, might be considered huge overreach, and a step too far. 

Already in the traditional financial sector the average retail investor is completely barred from trading in instruments that are considered to be only for those with “accredited investor status”.

That stablecoins also might be prohibited to retail traders could be the last nail in the coffin of retail investor participation in much of crypto. Stablecoins are a tool for trading in and out of cryptocurrencies and are useful for holding value in downturns.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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