A Crowdsourced r/BitcoinCA response to the Canadian securities regulatory framework for crypto-asset trading platforms

If I receive a positive response to this post then I will probably sticky the thread until May 15th (the deadline for feedback to be submitted to the OSC).

Background: https://www.osc.gov.on.ca/en/NewsEvents_nr_20190314_csa-consult-on-regulatory-framework-crypto-asset-trading-platforms.htm

Detailed Document: https://www.osc.gov.on.ca/documents/en/Securities-Category2/csa_20190314_21-402_crypto-asset-trading-platforms.pdf

Question By Me: What is your relationship/expertise/experience with cryptocurrency. Are you a cryptocurrency user, miner, trader, platform builder, business etc? This question is not mandatory, but it's more for the regulator to get a sense of your demographic/where you are coming from.

Questions asked by the OSC:

1. Are there factors in addition to those noted in Part 2 that we should consider?

2. What best practices exist for Platforms to mitigate the risks outlined in Part 3? Are there any other significant risks which we have not identified?

3. Are there any global approaches to regulating Platforms that are appropriate to be considered in Canada?

4. What standards should a Platform adopt to mitigate the risks related to safeguarding investors’ assets? Please explain and provide examples both for Platforms that have their own custody systems and for Platforms that use third-party custodians to safeguard their participants’ assets.

5. Other than issuance of Type I and Type II SOC 2 Reports, are there alternative ways in which auditors or other parties can provide assurance to regulators that a Platform has controls in place to ensure that investors’ crypto-assets exist and are appropriately segregated and protected, and that transactions with respect to those assets are verifiable?

6. Are there challenges associated with a Platform being structured so as to make actual delivery of crypto assets to a participant’s wallet? What are the benefits to participants, if any, of the Platforms holding or storing crypto assets on their behalf?

7. What factors should be considered in determining a fair price for crypto assets?

8. Are there reliable pricing sources that could be used by Platforms to determine a fair price, and for regulators to assess whether Platforms have complied with fair pricing requirements? What factors should be used to determine whether a pricing source is reliable?

9. Is it appropriate for Platforms to set rules and monitor trading activities on their own marketplace? If so, under which circumstances should this be permitted?

10. Which market integrity requirements should apply to trading on Platforms? Please provide specific examples.

11. Are there best practices or effective surveillance tools for conducting crypto asset market surveillance? Specifically, are there any skills, tools or special regulatory powers needed to effectively conduct surveillance of crypto asset trading?

12. Are there other risks specific to trading of crypto assets that require different forms of surveillance than those used for marketplaces trading traditional securities?

13. Under which circumstances should an exemption from the requirement to provide an ISR by the Platform be appropriate? What services should be included/excluded from the scope of the ISR? Please explain.

14. Is there disclosure specific to trades between a Platform and its participants that Platforms should make to their participants?

15. Are there particular conflicts of interest that Platforms may not be able to manage appropriately given current business models? If so, how can business models be changed to manage such conflicts appropriately?

16. What type of insurance coverage (e.g. theft, hot-wallet, cold-wallet) should a Platform be required to obtain? Please explain.

17. Are there specific difficulties with obtaining insurance coverage? Please explain.

18. Are there alternative measures that address investor protection that could be considered that are equivalent to insurance coverage?

19. Are there other models of clearing and settling crypto assets that are traded on Platforms? What risks are introduced as a result of these models?

20. What, if any, significant differences in risks exist between the traditional model of clearing and settlement and the decentralized model? Please explain how these different risks could be mitigated.

21. What other risks could be associated with clearing and settlement models that are not identified here?

22. What regulatory requirements (summarized at Appendices B, C, and D), both at the CSA and IIROC level, should apply to Platforms or should be modified for Platforms? Please provide specific examples and the rationale.

Goal of this thread: I'm hoping that people will answer some of these questions in the comments. Even answering one question that you are interested in would be helpful, but don't feel obligated to answer all the questions. Anyone can participate. My hope is that all responses can be aggregated into one document and submitted on behalf of myself or another user to the OSC.

If you don't want your reddit username to be included in the aggregated document then please make mention of that in your comment.

Less then professional or trolling responses will not be included.

If you would like to be the person to put your real name on the aggregated submission to the OSC please feel free to make a throw away account and pm me with your details.

UPDATE: I believe this thread got enough positive support to sticky it for the time being and move forward tentatively with faze two.

I view this exercise as an opportunity to give the regulators a strong response from the Bitcoin community at large. A growing trend has been "Blockchain experts" being the only participants in this kind of process, so I'm hoping we can change that and add our collective voice to this process.

Faze two will involve me drafting an introduction and adding comments posted here to a publicly viewable/but not editable, google doc.

I encourage you all to give some thought and consideration to your posts, as low quality posts may be excluded. Please give some thought to punctuation, sentence structure and formatting. The more professional the better. You do not need to answer each question, you can even give a general opinion that does not address any of the questions asked by the regulators.

Furthermore, if you do not want your reddit name associated with the submission, please mention this in your post.

Lastly, if you are a credible Bitcoin enthusiast or computer science expert and would like to publicly represent the collective comments that are accumulated in this exercise, then please PM me with a throwaway reddit acocunt for next steps.