A piece of news that has excited members of the crypto community, particularly ones in Canada, is Coinbase securing a restricted dealer license. As confirmed by the Ontario Securities Commission (OSC), Canadians are gleeful about new opportunities this development brings amidst regulatory changes that have dampened the spirits surrounding anything cryptocurrency. If you are wondering what the fuss is about, especially since Coinbase already operated in Canada, what necessitated the move, and where this places other crypto exchanges, continue reading.
But wasn’t Coinbase already in Canada?
Yes, Canadians were able to use the services of Coinbase but only as an international dealer. Being an international dealer means that (barring an exemption) Coinbase is not allowed to trade with Canadian customers in equity or debt securities of Canadian issuers other than government issuers — a restriction in its service offering.
One common denominator for successful businesses is the unrestricted nature of their service. The biggest corporations offer a complete offering to their users, from a product-based entity like Coca-Cola, which is available in over 200 countries, to a more specific service-based entity like Lucky Block, which allows users to deposit with Doge, withdraw, and carry out several transactions with the cryptocurrency, which will not change regardless of what happens with Coinbase and other exchanges in Canada.
Coinbase understands the philosophy and has been making inroads to improve its service offering, starting with its partnership with Peoples Trust Company. The strategic nature of this union endeared Coinbase to its newfound Canadian following by allowing users access to the Interac e-transfer feature. It is believed to have been hotly requested by users in the region, with statistics showing that at least 88% of eligible Canadians have at some point used Interac e-transfer, as such an important feature to have.
Furtherance in this commitment was shown when Coinbase filed its pre-registration undertaking (PRU) in March last year, launched in August of the same year, before announcing its restricted dealer license on April 3, 2024.
What does the restricted dealer license change?
Being a recipient of this restricted dealer license certainly comes with benefits, but what are they, and how much more different is it from when Coinbase only had an international dealer license?
The first thing to look at is the Canadian market size. According to Statcan, 84% of Canadians own a smartphone, which is more than 4 in 5. The numbers become more impressive when you consider that 96% of Canadians between the ages of 15 and 44 own a smartphone. This is coupled with the fact that Canada’s crypto ownership rate of 18% is higher than the global crypto ownership rate of 11.4%. This paints a picture that Canada has all the makings for a crypto company to thrive, and it only makes sense that Coinbase set up shop there.
In the words of Lucas Matheson, Coinbase’s Canadian Country Director:
“We have a population here that’s highly educated, that’s technology-savvy, that understands the digital economy. Our registration in Canada makes us the first international and largest cryptocurrency exchange that’s registered in Canada. That positions us really well to help millions of Canadians access the digital economy.”
Also, including and beyond the Canadian landscape, Coinbase receiving a restricted dealer license can be seen as a positive step. It creates a regulatory framework that other countries still in doubt or hammering down on crypto can adopt. A common problem that has plagued companies in the crypto space is that they operate in a novel field where there’s not a lot of precedence, one that many stakeholders and investors believe to be the Wild West and rife with irregularities that often leave countries with no choice than to clamp down with extreme regulatory force as seen with Canada.
However, this breath of fresh air shows that it is indeed possible for crypto organizations to be bent into shape as they are and not sardined into following other laws from adjacent industries that might restrict growth in the sector.
This is achieved and achievable due to the strategic exemptions that Coinbase and others like it hoping to get the same license would enjoy when they become properly licensed by the Canadian government represented by the Ontario Securities Commission.
Where does this put other crypto exchanges?
On the 12th of May 2023, the world, particularly Canadians, was rocked by the news that the largest crypto exchange by trading volume, Binance, was exiting the country. This left many crypto users, including those who trade it for a profit and those who use coins like Solana for online gambling, confused and shocked.
Binance and Changpeng Zhao (CZ) had these to say on the matter:
“Unfortunately, (the) new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time.”
“We are confident that we will someday return to the market when Canadian users once again have the freedom to access a broader suite of digital assets.”
Kraken, on the other hand, is taking this new guidance that Binance considers no longer tenable with grace as they, like Coinbase, have decided to seek a restricted dealer status. Kraken, which has been operating in Canada for over a decade, has assured users of its commitment to continue providing the same great service. The crypto exchange is believed to be well on its way in this regard after it filed a pre-registration undertaking with the Ontario Securities Commission in March 2023.
Yes, Coinbase getting a restricted dealer license is a big deal. Not only does it set a precedent for crypto exchanges that want to operate in Canada, but it also creates a regulatory framework that other countries scratching their heads over regulating crypto can reproduce. First, Coinbase, very soon Kraken, and hopefully, at some point, Binance. The Canadian crypto space is in the best hands.
