Canadian Regulator Probe Finds Liquitrade Engaged in Illegal Crypto Exchange Activities

The British Columbia Securities Commission (BCSC) has concluded a thorough investigation into Liquitrade Ltd., revealing that the company has been operating an unauthorized crypto asset trading platform, known as LATOKEN, within the province. This probe has significant implications for the regulation of cryptocurrency exchanges in Canada.

Liquitrade Ltd., incorporated in the Cayman Islands, launched LATOKEN in British Columbia in 2020. The platform quickly gained traction, boasting over 1.5 million traders by 2022 and claiming to be a “regulated exchange” with substantial daily trading volumes. However, the BCSC’s investigation has uncovered that these claims were misleading.

Findings of the Investigation

The BCSC’s probe determined that LATOKEN users were not actually trading cryptocurrencies like Bitcoin or Ethereum. Instead, they were trading contractual rights to these assets, which the BCSC classified as derivatives. This distinction is crucial because it means that LATOKEN was operating outside the legal framework established for crypto exchanges in British Columbia.

A key aspect of the investigation involved a BCSC investigator creating an account on LATOKEN, purchasing crypto assets, and attempting to trade them. The investigator found that users did not have direct control over their crypto assets and could only withdraw or trade them through Liquitrade’s systems. This setup raised significant concerns about the platform’s transparency and user control over assets.

Regulatory Implications

The BCSC’s findings highlight the challenges regulators face in overseeing the rapidly evolving cryptocurrency market. Peter Chow-White, a professor at Simon Fraser University, noted that governments worldwide are grappling with how to regulate decentralized financial systems effectively. The case of Liquitrade underscores the need for clear regulatory guidelines and robust enforcement mechanisms to protect investors.

Potential Consequences for Liquitrade

The BCSC is now considering potential sanctions against Liquitrade, which could include monetary fines and bans on market participation. These measures aim to deter other unauthorized crypto exchanges from operating in the province and ensure that all trading platforms comply with local regulations.

Sources:

https://grafa.com/news/liquitrade-found-operating-illegal-crypto-exchange-in-british-columbia-244428

https://ca.news.yahoo.com/crypto-trading-platform-operating-b-195525030.html