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Opinion: Rising cost of compliance may lead to consolidation

FP | Ethan Lou | Mar 30, 2022

Compliance cost and burden - Opinion: Rising cost of compliance may lead to consolidationIf you’ve ever wondered how onerous it is to register as a securities dealer with the Ontario Securities Commission, wonder no more. The cryptocurrency trading platform Bitbuy Technologies Inc. has put a dollar figure on it: more than $1.5 million.

That’s the overall increase in spending, including hiring more qualified staff, to deal with the new, more stringent crypto requirements from Canadian regulators, Bitbuy’s chief executive Michael Arbus said in an email. Additional compliance costs are in the “multi-millions” per year, he added.

See:  Snapshot: the regulatory framework for financial services compliance in Canada

Arbus was speaking ahead of Kevin O’Leary-backed WonderFi Technologies Inc.’s purchase of Bitbuy’s parent First Ledger Corp. in a $206 million deal that closed last Thursday.

That combined company, a spokesman said, has grand ambitions to “consolidate the Canadian digital asset industry, potentially acquiring smaller exchanges,” a goal tied directly to the burden those smaller players face when it comes to registering as securities dealers.

Their ambition might foretell a growing trend in the Canadian cryptocurrency space.It’s not just the securities registration that’s a lot to deal with. From tackling so-called “freedom convoy” crypto fundraising under the Emergencies Act to the talk of crypto’s role in the Russia sanctions — the shift these days seems to be toward additional onus on centralized platform operators to police the crypto realm. Compliance is looking to become a hell of a burden.

See:  Kevin O’Leary-Backed DeFi Platform WonderFi to Purchase Bitbuy for CA$206M in Cash, Shares

At the same time, crypto mergers and acquisitions have been running wild. According to a PricewaterhouseCoopers report, the value of such deals globally went up nearly 5,000 per cent in 2021 to reach US$5.5 billion. For crypto trading planforms dealing with heavy compliance costs, there might just be even more consolidation ahead.

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NCFA Jan 2018 resize - Opinion: Rising cost of compliance may lead to consolidationThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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