When the value of Bitcoin rises and falls, so does the number of start-ups and enterprises promising new ways for investors to trade, exchange and profit from the cryptocurrency.
Taurus Exchange, which claimed to be Canada’s first zero-commission Bitcoin exchange, Bitcoin in a Box, Coinfresh and VFS Ventures and Securities, a cryptocurrency incubator, were all set up – and later folded – in Vancouver over the past decade .
Bitcoin-related businesses that darken can affect investors to varying degrees. An extreme example is QuadrigaCX, which described a review by the Ontario Securities Commission as “outdated fraud wrapped in modern technology.” Collectively, investors who used Quadriga, which had offices in Vancouver, lost at least $ 169 million because of the company’s co-founder’s fraudulent behavior.
At CC, Einstein Exchange was closed after the BC Securities Commission (BCSC) began investigating complaints from investors who could not access their assets. The company had less than $ 45,000 in cash and cryptocurrency, but owed its customers about $ 16 million, according to the BCSC.
While Quadriga and Einstein Exchange are not representative examples of Canada’s crypto-asset trading landscape, the lessons for investors are clear: knowing where you invest your assets and how they are kept safe.
“I think anyone thinking of stepping into this forum and buying Bitcoin as an investment – and personally I hesitate when I think of the word investment and Bitcoin a little at this point – should do their diligence due in fact. understand who they are dealing with, what they are really buying and understand that crypto assets are very volatile these days, ”said Mark Wang, director of capital markets regulation at BCSC.
Regulation of how securities and derivatives are traded in British Columbia falls under the jurisdiction of the BCSC. That can include crypto-assets like Bitcoin, depending on their characteristics and how those assets are bought and sold.
Speaking generally, Wang said that if investors buy and receive Bitcoin, it is considered a commodity transaction and outside the jurisdiction of the BCSC. However, if a customer buys the right to Bitcoin held by a trading platform, securities legislation applies. In other cases, where crypto-assets are considered securities or derivatives, legislation applies anyway.
The ability to sell securities in CC comes with a host of obligations – including insurance and disclosure requirements – which in turn gives investors greater transparency.
“The first thing someone should be looking at is [a trading platform] is regulated by the relevant securities regulatory authority, ”said Zach Masum, BCSC’s legal services manager in capital markets regulation and head of the commission’s fintech and innovation team, adding that crypto-asset trading platforms may be subject to other regulations, like those. which deals with money laundering.
In order to evaluate a trading platform, Masum recommends that investors do their due diligence by evaluating the principles of the platform, their history, platform operations and its structure.
“That is, if you buy Bitcoin on that platform and it is safe to keep that for you, you want to make sure that is a trusted entity to keep your assets safe , ”He said.
Adam Soltys, creator of the Coinos open-source crypto wallet and a now-defunct member of the Bitcoin Co-op, recognizes the risks of owning a digital asset held by someone else.
It is common, he says, for investors to keep their Bitcoin stored on an exchange or on another server, but doing so exposes those assets to a hack or “big exit scam” from people who close access and take the assets for themselves. .
“That has happened many times over the years,” said Soltys. “I always recommend people get a paper wallet or a hardware wallet. Make sure you store it yourself and don’t trust someone else to store it for you. “
Despite the risks, Soltys firmly believes in the benefits of Bitcoin.
“It’s going to be a good investment for people, because it’s immune to inflation, and I think over time we’re going to see more money printing from our governments,” said Soltys, pointing out that the amount of Bitcoin is fixed – capped at 21 million, according to bitcoin.org.
It is also portable, secure in its own right, easy to split down to 100-million bitcoin and difficult to fake.
“Bitcoin is like the ideal form of currency. It has these unique properties that make it good for making payments and storing your wealth, ”says Soltys.
After Soltys spoke to BIV, an anonymous account was exploiting bugs in Coinos server code and withdrawing 0.3 bitcoin, worth nearly $ 15,000 as of Jan. 13.
“There is still enough money to pay for everyone’s balances, and I hope to return to service within a couple of days,” Soltys wrote in a message to one hundred and more unique consumers of Coinos wallet.
“What doesn’t kill us only makes us stronger.”