If you’re 65 or older and you sign up for an account with the Vancouver-based cryptocurrency-trading platform Netcoins, you’ll get a phone call—just to make sure you know what you’re getting yourself into.

Mark Binns, acting CEO of Netcoins and chief executive of its parent company BIGG Digital Assets, said the company wasn’t obliged to put the practice in place to satisfy securities regulators. It’s done this of its own accord to help prevent vulnerable people from becoming victims of fraud, part of Netcoins’ efforts to become a destination people trust.

“I believe that any investor would prefer to deal with a licensed platform versus a non-licensed platform,” Binns said. “Just for peace of mind.”

Just a few months ago, Canadian cryptocurrency investors didn’t have much choice in the matter.

For a full year, Wealthsimple was the only crypto-trading platform operating with the blessing of securities regulators, with Coinberry becoming the second in August and Netcoins the third in October. Canadians who wanted to trade cryptocurrencies other than Bitcoin and Ether, or use them to make purchases, had no option but to use one of the hundreds of unregistered platforms that an investigation by The Logic showed were active in the country—with no guarantee they hadn’t just handed their money over to a scam.

Today—more than eight months after Canadian securities regulators announced a crackdown on the sector—there are six registered cryptocurrency-trading platforms, with Toronto-based Bitbuy recently becoming the first to receive approval to operate under the higher standards of a regulated marketplace. Globally, the sector still has a reputation for being indifferent or hostile to regulators, but in Canada, it’s professionalizing.

“The Canadian crypto-trading platform industry has matured and developed a lot over the past year,” said Lori Stein, a lawyer at Osler, Hoskin & Harcourt who advises crypto companies. “A rising tide raises all boats. I think it has been good for the industry in Canada.”

At an online event late last month, OSC chair and chief executive Grant Vingoe revealed some information about what had been going on behind the scenes before the regulator announced its crackdown in March. He had been surprised by how quickly demand for crypto trading had exploded, he said, and wanted to act more quickly than would have been possible by waiting for lawmakers to pass legislation.

“Often, priorities are thrust upon us,” Vingoe said. “Regulators can be perceived to be behind the curve. This was different. It just exploded so quickly.”

Dustin Walper, CEO of Toronto-based cryptocurrency-trading platform Newton, which is going through the registration process with regulators, said he hopes lawmakers don’t just consider the matter to have been dealt with by securities regulators. It’s a problem that regulators are interpreting existing laws rather than applying updated ones that are designed to reflect technological advances, he said.

“We really need politicians to write new law,” Walper said. “Especially if they want to create a dynamic ecosystem in Canada.”

Walper and other Canadian cryptocurrency-trading platform CEOs interviewed by The Logic said getting registered as securities dealers has meant expanding their staff. Walper said Newton now has 90 employees, up from 15 at the beginning of the year, with a lot of focus on accounting, finance and compliance.

Among the other time-consuming and expensive measures those CEOs are pursuing: beefing up their insurance, improving their financial reporting and having licensed custodians hold their clients’ crypto assets. The companies have also had to put in place suitability models, as regulators impose different rules on a platform depending on whether it conducts full assessments of whether each of its clients’ investments is suitable for them.

Cryptocurrency-trading platforms must also be more careful about how they market their services, thanks to guidance regulators issued in September. Adam Cai, CEO of the Toronto-based cryptocurrency-trading platform VirgoCX, which is seeking registration with regulators, said his company is going as far as monitoring influencers on TikTok to make sure they don’t make any out-of-bounds claims involving the platform.

“We’re becoming more cautious about every single statement we put out,” he said. “We have to document every single marketing message and check facts.”

In an email, Wealthsimple chief legal officer Blair Wiley said he’s happy to see other Canadian platforms making these investments. However, he noted the major international ones have yet to do the same. As The Logic reported last week, most of them are opting to place restrictions on Canadian users, instead.

“We are happy to see other Canadian platforms make the significant investments required to register and operate in a compliant fashion,” Wiley told The Logic. “But we have yet to see any foreign platforms do so, despite being much larger and having more resources.”

Meanwhile, Adam O’Brien, CEO of the Edmonton-based non-custodial Bitcoin trading platform Bitcoin Well, is feeling vindicated about his choice of business model. In January 2020, the CSA issued a staff notice asserting that provincial securities regulators had jurisdiction over virtual-currency dealers that hold coins in custody for their customers, stating that while the most popular cryptocurrencies are not themselves securities, the contracts into which many trading platforms enter with customers are.

But Bitcoin Well and other non-custodial platforms don’t hold the coins in custody—they leave it up to the customers to secure the passwords, or private keys, that provide access to them. Investing in cryptocurrency with a custodial platform is like storing gold bars at a bank, while investing with a non-custodial platform is like buying the gold bars and taking them home to store in a safe.

This interpretation of securities law has effectively created two different regulatory regimes, with custodial platforms required to register as securities dealers and non-custodial platforms simply required to register as money-service businesses with FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada. O’Brien said he thinks the higher standards placed on custodial platforms are entirely appropriate, given their long history of collapses and fraud.

“It’s pretty vindicating, if I’m being honest, that regulators agree with us that people that hold custody of other people’s Bitcoins need some serious regulation,” O’Brien said. “They can steal your money on a dime. They can wake up on a Wednesday and decide that after their coffee’s done, they want to steal your money. And that’s why they’re being regulated so heavily.”

Binns, the acting CEO of Netcoins, said he thinks it won’t be long before the idea of investing with an unregistered platform is a relic of history.

“It’s a laughable concept that you’d use a stockbroker that doesn’t have a licence, and it’s going to be the exact same way in crypto,” he said. “It’s inevitable. We’ve chosen to get out in front of it and take advantage of it.”