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Ontario’s securities regulator is seeking to suspend trading by international cryptocurrency exchange Poloniex after it breached provincial rules by failing to register with the Ontario Securities Commission.

The enforcement action taken against Poloniex – owned by Republic of Seychelles-based cryptocurrency company Polo Digital Assets Ltd. – is the first since the OSC warned crypto-asset trading platforms in late March they had to launch the process to register their operations with regulators by April 19.

Despite this warning, Poloniex did not contact the OSC to begin compliance discussions, according to a statement of allegations released by the regulator on Tuesday morning.

“Entities such as Poloniex, which flout this compliance process, expose Ontario investors to unacceptable risks and create an uneven playing field within the crypto asset trading platform sector,” the OSC alleged.

Poloniex is obligated to comply with Ontario securities laws even though it is not based in the province because it operates accounts for Ontario residents who buy and sell cryptocurrency assets. It is, however, unclear how many Ontario users use the platform. Poloniex did not respond to a request for comment on the OSC enforcement action.

The regulator alleges Poloniex engaged in a breach of conduct by trading securities without the “necessary registration,” and is calling for the exchange to completely stop its trading for clients in Ontario and the promotion of its business in the province. The OSC also wants to fine the exchange $1-million for each failure to comply with the rules.

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Canadian securities regulators have recently begun paying attention to the vast number of unregistered cryptocurrency exchanges that facilitate trades for Canadians, amid rapidly growing investor interest in digital assets. Part of the concern regulators have with cryptocurrencies is related to how they are stored – investors theoretically run the risk of losing their crypto holdings if the exchange in question cannot access their investments.

Regulators issued a notice to crypto exchanges on March 29, asking them to get in touch with regulators to figure out how to bring their operations into compliance. More than 70 platforms have initiated compliance discussions since then, according to the OSC, with more than a quarter of them based outside Canada.

There are hundreds of crypto exchanges that facilitate trades for Canadians, but some of the most popular platforms are foreign exchanges such as San Francisco-based Coinbase and Gemini, as well as Cayman Islands-based Binance. To date, however, none of these three platforms has completed its registration with the OSC. Wealthsimple Inc.’s crypto-trading platform remains the only regulated crypto exchange in Canada.

The OSC did not respond directly to a query on how many other crypto-asset trading platforms with Ontario users, like Poloniex, will be reprimanded for failing to register with regulators, but said it would “continue to take action” against non-compliant entities.

The regulator added platforms that have begun the compliance process are the ones with “the largest footprint in Ontario.”

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