Leading Canadian exchange, Kraken has issued a response to the call for public comments made by the country’s regulators regarding a consultation paper containing proposed rules for cryptocurrency exchanges.
As Stmarket.co reported in March, the proposal was released shortly after the fall of another Canada-based exchange, QuadrigaCX, and targets the provision of a regulated environment for both operators and users.
However, Kraken mentioned in its comment on the consultation paper that some sections of the proposed rules may end up forcing local exchanges to move offshore, instead of solving its primary purpose which is providing “regulatory clarity.”
Specifically, Kraken dwelt on the fact that a section of the regulation proposes to apply securities law to the relationship between exchanges and users. Kraken argued that except in cases where the cryptocurrency in question is classified as securities by the regulators, then such subjection to securities law “is both unnecessary and inappropriate.”
To clarify the matter, Kraken noted that cryptocurrency exchanges work more like custodians and bailees and as such “the assets are legally owned by the customer and not the Exchange operator.”
Customers funds are not used to finance the activity of the exchange Kraken writes in another section. Instead, client cryptocurrencies stay in an omnibus wallet while in the case of fiat, the exchange either holds the fund in a designated account or in client-owned bank accounts that they could access.
Meanwhile, Kraken’s suggestions for the consultation paper arrived on the last day for submission of comments regarding the proposed regulations, but could still have a significant impact on the final rules which Canadian regulators expect to release later this year.
Earlier in the day, we reported that the Bahamas is also in the middle of gathering public insights regarding a consultation paper containing proposed rules for crypto exchanges and businesses.