How regulation slowed FTX's growth, limiting the toll of its collapse in Canada

In Canada, regulatory intervention kept at least a partial lid on the venture capital backed platform's rapid expansion, despite the collapse of FTX.

FTX was in the process of buying Bitvo Inc. when it discovered it was on the verge of collapsing.

There was an issue with signing you up. Try again.

FTX would have been able to offer its services across the country if the deal had been completed.

Bitvo said Tuesday that its main shareholder, Pateno Payments Inc., called off the FTX acquisition before it got regulatory approval.

According to Bitvo, it did not close. We were trying to get regulatory approval.

According to sources who were not authorized to speak publicly about the matter, FTX wanted to piggyback on Bitvo's registration after a run-in with the Ontario Securities Commission.

The Ontario Securities Commission (OSC) told FTX in June of that year to stop selling products to Ontario retail investors until they were properly registered.

FTX was limited in what services it could offer in Ontario while Bitvo waited for regulatory approval of its takeover.

The firm acknowledged Ontario restrictions in a pop-up window on its website last week.

There is a list on the website of markets where the exchange didn't provide services. Canada was included in the note where there could be partial restrictions.

The platform had more than 30,000 users in Canada.

Sources familiar with the situation say that the OSC is interacting with FTX in 2021.

After the OSC announced in March of 2021 that they had to register with them and bring their operations into compliance or face regulatory action, Binance withdrew its services from Ontario.

The Ontario Securities Commission issued a rebuke and insisted that no entity in the group of companies held any form of securities registration in the province.

The battle between the regulators and the exchange continued until March, when a legally binding undertaking was signed by the exchange to cease activities that involved Ontario residents. There would be fee waivers and fee reimbursements for some Ontario users, as well as a commitment to prevent any activities involving Ontario residents.

While putting the matter aside, the OSC reserved the right to take enforcement action against Binance for any past, present or future violations of Ontario securities law.

Grant Vingoe, chief executive of the Ontario Securities Commission, told an audience at the Global Risk Institute's 2022 Summit in Toronto that global firms with "opaque" operations outside Canada, such as FTX, were included in the list.

The need for regulation on a collaborative basis, globally, was highlighted by the FTX meltdown.

While the sector may present opportunities, it can also carry significant risks to consumer protection as well as the stability, integrity, privacy, and security.

The Office of the Supremo of Financial Institutions, the Financial Consumer Agency of Canada, the Canada Deposit Insurance Corporation, and other federal agencies have been monitoring how risks are posed by the use of digital currency.

Despite the fact that most who responded lacked working knowledge of the practical, legal and regulatory particulars of owning them, 30 per cent of Canadians plan to invest incryptocurrencies over the next year.

Vingoe told the audience at the GRI Summit that he viewed that finding as a wake-up call about the need for more education and oversight, but that industry players immediately seized on the survey as a marketing pitch to entice more buyers forcryptocurrencies.

This year, two large Canadian pension plans have been burned by investments incryptocurrencies.

The Ontario Teachers' Pension Plan Board made a US$95-million investment in FTX, while the Caisse de dépt et placement du Québec wrote off its US$150-million investment in Celsius Network.

Charles Emond said that his team had done extensive due diligence. He said that they underestimated the time it would take to resolve the management and regulatory issues at Celsius and that perhaps the investment in the company was too early.

Bshecter@nationalpost.com is the email address.