Introduction

In case you haven’t heard the news, Coinsquare is now Canada’s first fully-regulated crypto-native IIROC broker dealer and ATS. The purpose of this document is to provide factual information around common questions that have come up regarding CCML becoming an IIROC investment dealer member. What does that mean for you? Read on for answers to some of the most common questions about Coinsquare and regulation.

Glossary

Here is a list of acronyms in this article and what they stand for.

CCML

Coinsquare Capital Markets Ltd.

CIPF

Canadian Investor Protection Fund

ATS

Alternative Trading System

IIROC

Investment Industry Regulatory Organization of Canada

SRO

Self-Regulatory Organization

CTP

Crypto Trading Platform

OEO

Order Execution Only


What is CCML and how is it related to Coinsquare?

Coinsquare Capital Markets Ltd. (CCML) is a new IIROC dealer member firm. CCML is a subsidiary of Coinsquare Ltd. and operates our fully-regulated digital asset trading platform. CCML also operates the Coinsquare ATS and is a registered investment dealer. By registering as an IIROC dealer member, CCML will be able to offer the safeguards that all IIROC members offer, and the protection of CIPF for the cash, but not crypto assets, held by CCML on behalf of clients.


Who is IIROC and why Is IIROC regulation so important?

The Investment Industry Organization of Canada (IIROC) is the Self Regulatory Organization (SRO) that regulates investment dealers as well as equity, fixed income, derivatives and digital asset trading across Canada. Basically, IIROC is the organization that oversees investment firms that offer stocks, bonds, options, and futures, and now cryptocurrencies. CCML is the first native Crypto Trading Platform (CTP) to achieve full status as an IIROC dealer member.


What is the CIPF, and what assets are protected?

The Canadian Investor Protection Fund (CIPF) is an investor compensation fund for IIROC member firms.

If an IIROC dealer becomes insolvent, CIPF provides limited protection for eligible property held by the IIROC dealer on behalf of a client. The limits on CIPF protection are generally $1 million for all general accounts combined, and $1 million for each type of separate account (such as registered retirement accounts).

In practice, the CIPF protection is not commonly invoked because IIROC member firms are held to rigorous standards of compliance and capital requirements as well as frequent detailed examinations and control standards. These processes ensure the proper segregation and protection of client funds.

Notably, CIPF protection only covers the cash balances in clients accounts (applicable to both Canadian and US dollars) and not any digital asset balances. CIPF also does not guarantee clients against investment losses, and does not protect clients against losses resulting from unauthorized logins to investing accounts.


Why did Coinsquare decide to pursue IIROC regulation?

The decision made by Coinsquare to move directly to being IIROC-regulated has allowed us to meet the industry goal of creating a regulated and open financial platform for digital assets. IIROC regulation strengthens our ability to build trust in a rapidly evolving market, with Coinsquare being able to provide necessary protection for investors, decrease security risks, and ensure a secure framework for clients to diversify their investments in the digital asset market with confidence.

This commitment to setting the industry standard led Coinsquare to pursue IIROC dealer regulation from the outset, as opposed to interim “restricted dealer” registration, which most other Canadian crypto asset trading platforms have pursued. Ultimately, all crypto asset trading platforms will be required, under the terms of their CSA orders, to apply for IIROC dealer registration and membership within a two year period, and Coinsquare is proud to be the first to accomplish this.


What is digital asset custody and who are CCML’s custodians?

When clients purchase digital assets through Coinsquare, CCML is responsible for safekeeping of these assets. This safekeeping is referred to as custody. CCML uses external, specialist digital asset custodians to provide custody of client assets. These custodians include Tetra Trust and Coinbase Custody. All custodians are separately licensed and regulated trust companies, subject to rigorous licensing requirements.


Why do I need to sign new account agreements?

Going forward, Coinsquare’s digital asset trading platform will be operated by CCML. Due to various IIROC regulatory requirements, clients are required to sign a new set of legal agreements with CCML in order to continue to access the trading platform.

The documents that you’ll be asked to sign next time you login are:

  • Relationship Disclosure Document - This document describes the products and services offered by CCML, the nature of the account, CCML’s related parties, and CCML’s responsibilities to its clients.

  • Risk Statement - This document describes the various risks involved in trading digital assets that clients should be aware of.

  • Client Account Agreement - This document is the legal contract that sets out CCML’s terms of use, and the rights and obligations of both CCML and the client with regard to the client’s account with CCML.

IIROC requires that all clients of member firms agree to the above documentation and disclosure agreements before operating an account. Therefore, you’ll need to confirm that you have read and agreed to each statement next time you login.


What happens If I refuse to sign the new agreements?

If you choose not to sign these required CCML documents, you can request to have your accounts closed and all assets returned to you. Reach out to our Support team to make this request.


Does Coinsquare’s new regulatory status affect me?

CCML becoming an IIROC member comes with many benefits. You can rest assured that you are working with a Canadian platform that has met the highest regulatory standards required in the traditional securities industry. This includes strong financial controls, insurance coverage, financial reporting, and cybersecurity controls which are all designed to protect investors.

On a day-to-day level, the only change you’ll notice is the new name and new account agreements. There will be no changes in how you access the products and services we offer.


What are crypto asset statements, and why should I read them?

CCML offers digital assets that have been carefully vetted, but all digital assets have unique characteristics based upon the nature of the asset class and the underlying associated blockchain technology. These characteristics can change and affect the risk profile of the digital asset. In order to provide clients a high-level overview of unique features of the digital asset and the associated risks with investing in it, CCML offers a Crypto Asset Statement for each digital asset available for trading on our platform.

We strongly encourage clients to do their own research before investing as this document is not meant to be an all-encompassing analysis of the possible risks associated with any digital asset.


Can CCML provide Investment Advice?

CCML is an Order Execution Only (OEO) IIROC dealer and marketplace. This designation means that we do not provide investment advice or recommendations.


Will CCML offer new features?

CCML has been working in the background on several new features, services and products, with plans to launch them over the coming months. Please watch out for email updates from CCML regarding these new features in the near future.


Can I still withdraw digital assets?

CCML will continue to support transfers of digital assets to and from our platform where applicable. Some digital assets are not currently available for withdrawal due to third-party technical reasons. For more information, please see our website for a list of digital assets that are trade-only and those that are available for withdrawal.


Who do I contact If I have questions about the process?

Coinsquare is happy to answer any questions related to the regulatory status of CCML. Your questions can be directed to our Compliance team via email at compliance@coinsquare.com.


What happens to my orders in Coinsquare Pro before I accept the CCML documents?

Coinsquare Pro orders that were placed with Coinsquare Ltd., before the transition to CCML, will remain active for 30 days from October 12, 2022. To ensure that those orders remain active beyond 30 days, users must log into their account and sign the necessary CCML documents. Otherwise, the orders will be canceled, and funds released to the account, after the 30-day period ends.


What happens to my orders on Coinsquare Pro if I choose not to sign the CCML documents?

If you choose not to sign the necessary documents from CCML, your Coinsquare Pro orders will be canceled 30 days after the date on which Coinsquare Ltd. transitions its trading business to CCML. Additionally, you will not be able to place any new orders on Coinsquare Pro or execute any new trades through Coinsquare Trade or Coinsquare Wealth until the necessary CCML documents are signed.


What is the difference between CCML’s regulatory status and that of other Canadian crypto exchanges?

CCML is a registered investment dealer and IIROC dealer and marketplace member. CCML’s regulatory status and registration category is the most comprehensive form of regulation under the Canadian regulatory system. All crypto-asset trading platforms (CTPs) in Canada will be required to achieve this permanent regulatory status in the near future. While other Canadian platforms have been pursuing other interim registration and regulatory approvals, they will all be required to apply for, and achieve, IIROC dealer status in order to continue operating in Canada.


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