The regulatory environment concerning crypto-assets in Canada is continually evolving, aiming to safeguard investors and support market transparency. In line with this objective, over 100 new digital token identifiers (DTIs) were allocated in January 2024 to meet the regulatory reporting requirements for crypto-asset trading platforms (CTPs). This adoption of the use of DTIs issued by the DTI Foundation enables authorities to effectively track and identify crypto-assets accessible to Canadian residents.

 

  • The ISO 24165 DTI standard for data reporting is being adopted by crypto-asset trading platforms to satisfy trade reporting requirements in Canada.
  • The use of ISO 24165 was initiated in May 2023, as part of the conditions to the time-limited relief granted by securities regulators in Canada to specific crypto-asset trading platforms from various registrant obligations, prospectus requirements, and trade reporting requirements.
  • The use of DTIs for crypto-asset identification signifies adoption in regulatory reporting by crypto-asset trading platforms across Canada as part of the regime applicable to such platforms.

 

Evolution of Canada’s Regulatory Framework

 

The Canadian Securities Administrators, in collaboration with the Canadian Investment Regulatory Organization (formerly known as the Investment Industry Regulatory Organization of Canada) issued guidance in 2021 about the application of securities legislation and regulatory requirements to crypto assets. Under the current regulatory framework, all crypto-asset trading platforms (known as “CTPs” in Canada) facilitating or proposing to facilitate the trading of (i) security tokens, or (ii) crypto contracts [1] are required to register. Securities legislation applicable to CTPs is dependent on the type of activities it undertakes.

 

Over a dozen CTPs have already registered under the current regulatory framework, while a handful of other CTPs have filed enhanced pre-registration undertakings (PRUs) to continue operating while full registration and any reliefs are reviewed. As part of a minimum set of requirements, all CTPs, either registered or that have filed PRUs, must submit reports to their principal regulators.

 

DTI Implementation

 

The DTI was first introduced in May 2023 as a trade reporting data requirement in the time-limited relief granted to Shakepay Inc. to continue operating subject to certain terms and conditions. Since then, all registered CTPs or those with signed PRUs are required to utilise the ISO 24165 DTI standard within their data reporting requirements. The DTI provides a consistent identifier for CTPs to flag all crypto-assets offered to investors with regulators.

 

The use of DTIs as a crypto-asset identifier was a choice made by Canadian securities regulators. This marks another step toward regulatory adoption of the DTI standard. The European Securities and Markets Authority (ESMA) in Europe has also proposed the use of DTIs under the MiCA crypto-asset regime.

 

DTI Foundation’s Rowan Varrall, said, “Canada’s proactive use of DTIs in navigating the complexities of crypto-asset regulation not only promotes market transparency but also aligns with global standards. We’re thrilled the DTI standard supports both market participants and regulators as crypto and digital asset markets continue to grow.”

 

Reference

 

CSA Regulation and Enforcement Actions – Crypto Trading Platforms

 

[1] Instruments or contracts involving crypto assets, as indicated in CSA Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto-Assets (CSA SN 21-327)