Canada Bans Crypto Margin Trading

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  • The Canadian Securities Administrators have announced a banned crypto platforms from offering margin and leverage trading
  • The new rules also demand that exchanges segregate assets and keep customer funds with third-party custodians
  • The UK banned margin and leverage trading in 2021

Canada has banned margin trading for amateur crypto investors, with the collapse of FTX seemingly instrumental in its decision. The Canadian Securities Administrators (CSA) yesterday announced that it is “strengthening its approach to oversight of crypto trading platforms” by preventing them from offering leverage and margin trading facilities and a requirement to keep customers’ funds with an “appropriate custodian”.

Margin Trading Ban and Segregated Funds

Canada was stung by the collapse of the country’s then-biggest exchange, QuadrigaCX, in 2019 and the embarrassment it caused the country. This led to a new piece of legislation being proposed that would see all crypto exchanges in Canada switch to a blockchain-based ledger platform to prevent private ledgers from operating in the dark.

The collapse of FTX has prompted it to take further action to protect customers. This includes ensuring that there is no commingling of funds, as was the case with FTX, and a ban on offering leverage and margin trading, which often sees uneducated traders lose everything:

Crypto trading platforms giving these undertakings agree to comply with expanded terms and conditions that will include, among other things, requirements to hold Canadian clients’ assets with an appropriate custodian and segregate these assets from the platform’s proprietary business, as well as a prohibition on offering margin or leverage for any Canadian client.

Canada Follows in UK’s Footsteps

Canada isn’t the first country to ban margin trading on crypto exchanges. In January 2021, the UK’s financial watchdog the Financial Conduct Authority banned UK-based companies from offering futures, options, CFDs, and ETNs to British customers, a move that also impacted British users of popular exchanges such as Binance.