A BC Securities Commission (BCSC) panel has determined that LiquiTrade Ltd., the operator of the crypto trading platform LATOKEN, facilitated derivatives transactions without proper registration and operated an illegal exchange in British Columbia.
LiquiTrade Ltd., incorporated in the Cayman Islands, launched LATOKEN in 2020. The platform is marketed through various channels accessible to British Columbia residents, enabling them to use the service. While LATOKEN shows users their notional balance of crypto assets, users do not directly buy and sell them. Instead, they trade contractual rights to the assets, granting them the right to request withdrawals from the platform in the future.
The BCSC panel concluded that these contractual interests are derivatives, financial instruments regulated by the Commission, deriving their value from underlying assets, such as crypto assets in this case. Despite not being registered under the Securities Act, LiquiTrade facilitated trading by creating a derivatives trading market and promoting derivatives on LATOKEN.
Furthermore, the panel found that LiquiTrade operated as an unauthorized exchange, as it was not sanctioned by the BCSC, a requirement under the act. Platforms that facilitate the buying and selling of crypto assets by Canadians must register with provincial or territorial securities regulators and comply with specific conditions to protect investors. The Canadian Securities Administrators’ website provides a list of authorized crypto trading platforms.
The BCSC issued the notice of hearing against LiquiTrade as part of a coordinated effort by Canadian securities regulators to ensure compliance with securities legislation. The panel will now consider sanctions against LiquiTrade, which could include monetary penalties or market participation bans.
The BC Securities Commission, an independent provincial government agency, strives to make the investment market benefit the public. It sets rules, monitors industry compliance, takes action against misconduct, and provides guidance to investors and the industry.
According to the BCSC, the decision is part of its commitment to ensuring that crypto trading platforms operating in Canada comply with the relevant securities laws and regulations.