- Following the collapse of Ftx the Canadian Securities Administration (CSA) of Canada has decided to ban crypto leverage and margin trading.
- The bankruptcy of the FTX exchange is one of the most important black events in the crypto market in recent years and its consequences will be seen for a while longer. While thousands of users maintain hopes of at least recovering part of the funds stolen by the company led by the now imprisoned Sam Bankman Fried, some countries take measures to protect their citizens.
The most notable and recent case is that of Canada: the North American country, through the Canadian Securities Administration (CSA), has decided to ban crypto leverage and margin trading after the collapse of FTX, explained Cointelegraph. It is worth noting that the exchange, in June 2022 had tried to enter the country, but was denied by local regulators.
These types of trades are the ones that tend to have the highest commissions and are the ones that generate good profits for centralized exchanges.
“Custodians will generally be considered qualified if they are regulated by a financial regulator in Canada, the U.S. or a similar jurisdiction with a conduct of business and financial regulatory oversight regime,” the CSA said in the statement released Tuesday, Dec. 13.
Thus, all companies operating in Canada, whether local or foreign (Binance, Coinbase, KuCoin, Crypto.com, for example), will have to comply with this new regulation to be allowed to continue operating.
With this announcement, the CSA referred to the previous one, published on August 15 of this year. On that occasion, the Canadian authorities had written that they “expected commitment from unregistered cryptocurrency trading platforms operating in Canada while pursuing registration in the form of a pre-registration commitment.”
FTX attempted to enter the Canadian market
In June, FTX unsuccessfully attempted to acquire local platform Bitvo. This move was part of its expansion plan that ultimately did not materialize, so Canadian customers were not affected and neither was the exchange: to date it continues to operate smoothly without having its funds compromised.
Pamela Draper, CEO of Bitvo, explained that the transaction did not go ahead at the time because “the companies were working to satisfy closing conditions, the most important of which was regulatory approval from the Alberta Securities Commission”.
The Canadian Securities Administration highlighted, once again, that trading in the crypto market is a “high-risk” investment and emphasized that it is important to trade on platforms enabled within the country.
What is crypto leverage and how does it work?
Crypto leverage or margin trading allows us to use more funds than we actually have: a x10 means that we are increasing the position by 10 times, while a x100 is that it grows by 100 times.
For example: if you want to buy $1,000 in Bitcoin, with a leverage of x10 we only need 100 in the account. The rest is borrowed. And the profits will no longer be for those 100, but for 1,000.
However, not everything is so simple, because when the operation is not successful it is easily to be liquidated. A variation of 1%, in a case like this, could be decisive: since the movement is not on the 100 reais, but on those 1,000.
