New SRO Roundtable Discussion: Managing Crisis Events Involving New SRO Members Who Trade in Crypto-Assets

Overview

On April 19, 2023, we held a roundtable exercise with New SRO Members who are approved to trade in contracts or instruments based on crypto assets (New SRO Members who trade in crypto-asset products) and some of their key counterparties. The objective of the roundtable was to identify potential risks and challenges to New SRO in managing a crisis, distress or insolvency of a Crypto Trading Platform (CTP) regulated by New SRO.

Background

New SRO has internal policies and procedures to monitor and respond to crisis or distress situations involving Member firms in order to ensure the safeguarding and timely delivery of assets to investors, and to minimize disruption to the markets and the system. Such crisis situations can range from temporary disruptions to an insolvency of the Member firm.

We conducted a roundtable discussion with New SRO Members who trade in crypto-asset products and their key counterparties in order to incorporate considerations unique to crypto-asset products in our internal crisis response policies and procedures.

Scope

The subject of the roundtable discussion was limited to New SRO members who trade in crypto asset products. Ernst & Young was engaged to facilitate the roundtable discussion.

Participants

The participants involved in the discussion were the New SRO Members who trade in crypto asset products, and their custodians, liquidity providers, and key technology providers that provide solutions for secure wallet storage and blockchain reporting, including:

• New SRO Members
  • Coinsquare Capital Markets Ltd.
  • Fidelity Clearing Canada ULC
• Custodians
  • BitGo Trust Company
  • Coinbase Custody Trust Company, LLC
  • Fidelity Digital Asset Services, LLC
  • Gemini Trust Company, LLC
  • Tetra Trust Company
• Liquidity Providers
  • Aquanow
  • B2C2
  • DV Chain
• Technology providers
  • Chainalysis, Inc.
  • Fireblocks
• Other
  • Wealthsimple Digital Assets Inc.1

The Canadian Investor Protection Fund was also present as a participant.

We would like to express our sincere gratitude to the participants, many of whom traveled from outside Toronto to attend in-person, for their voluntary and valuable contributions at our roundtable exercise.

Next steps

We will follow-up on items raised at the roundtable and update our internal crisis response plans so that we can be as prepared as possible to minimize harm and uncertainty to investors, the markets and the industry in the event of a crisis or insolvency of a Member firm. We will continue to consult with industry participants as issues in the regulation of crypto-assets evolve.

• 1Currently approved as a Restricted Dealer by the Ontario Securities Commission