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The Ontario Securities Commission is alleging that the Toronto cryptocurrency exchange also engaged in market manipulation, misled its clients and retaliated against a whistleblower. The regulator is holding a hearing on July 21 to discuss an undisclosed potential settlement with Coinsquare. The company did not immediately respond to The Logic’s request for comment. (The Logic)

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Talking point: Coinsquare is one of the largest and best known cryptocurrency exchanges in Canada. It was most recently valued at  $430 million in a 2018 round led by Canaccord Genuity. In June, Vice reported that Coinsquare was inflating its trading volumes, according to leaked internal documents, and that the OSC had visited the company’s offices. This isn’t just about Coinsquare though. The OSC brought the proceeding to “send a message to other market participants in the crypto asset sector that deceptive conduct will not be tolerated in Ontario’s capital markets.” In June, the commission released a report into the collapse of Quadriga, another cryptocurrency exchange, stating that the firm fell apart due to fraud.

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The cryptocurrency company laid off about a quarter of its staff, including COO Robert Mueller. Thursday’s layoffs follow a round affecting 20 employees in July. (BetaKit)

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Talking point: The layoffs are a hit to a company with ambitious plans to build a bank with cryptocurrency at its heart; it hired former BMO VP Ken Tsang as its CFO, and said it wanted to raise a $150-million IPO last year. Companies that are trying to go public face a lot of pressure to show profitability, or at least the potential for it. The layoffs follow a number of significant—and expensive—moves made by the company last month. Coinsquare expanded to 25 European countries and acquired cryptocurrency wallet BlockEQ for $25 million.

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The deal will give Coinsquare users access to Stellar—the blockchain-based payment network that BlockEQ runs on—which lets users exchange fiat currencies for virtual ones to send money across borders. BlockEQ will remain its own entity, operating as a subsidiary of Coinsquare. (Globe and Mail)

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Talking point: The acquisition—Coinsquare’s first—signals heightened competition with rival Coinbase to become the top crypto-based financial institution. While the company started as a trading platform in 2014, it now has a portfolio and investment fund management division, a back-end service that lets other companies launch their own trading platforms using Coinsquare and a crypto-mining business in Quebec. After a generally bad year for crypto, though, not everyone in the business is faring so well: on Thursday, ConsenSys, a blockchain software developer, confirmed a 13 per cent staff cut.

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Exchanges will have to identify their clients, keep records of transactions and report suspicious ones to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Some cryptocurrency dealers are already voluntarily complying with the requirements. (Globe and Mail)

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Talking point: Banks have so far avoided working with exchanges because of the risk of being caught up in money laundering or terrorist financing potentially conducted through cryptocurrency. FINTRAC’s monitoring addresses those concerns. But complying with the new rules could be difficult, given the anonymity of crypto transactions. Charlene Cieslik, Coinsquare’s chief anti-money-laundering officer, said the exchange can’t always identify to whom a client is selling coins, or from whom they are buying them. And, exchanges could face another round of new rules, this time from provincial regulators. In a March consultation paper, the Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada raised concerns about the platforms’ cybersecurity, whether they separate clients’ funds from their own and how they store the private keys to customers’ wallets.

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A message on Quadriga’s website says the company has filed for creditor protection following months of customer complaints about difficulties withdrawing money. The company said a legal battle with CIBC caused the delays. The bank froze $26 million held in accounts belonging to Quadriga’s payment processor in January 2018; CIBC said it didn’t know who the money belonged to. (Globe and Mail)

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Talking point: The development is the latest indication of challenges for the cryptocurrency industry. Coinsquare, which raised $50 million last year and aimed for an IPO that same year, laid off 40 employees and key executives earlier this week. Last week, Kik CEO Ted Livingston said that the company would fight back if the U.S. Securities and Exchange Commission decided to decided to file a suit against its ICO, which raised US$100 million. The company decided not to launch its ICO in Canada after Livingston claimed it could not get clear direction from the Ontario Securities Commission on which securities laws would apply. In a Medium post, Livingston spoke to how murkiness around regulations was making it difficult to work in this area. “We all believe that this industry needs regulation, but we also believe that this is not the way to get it,” he wrote.

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CIBC’s exchange-traded funds (ETF) begin selling on the Toronto Stock Exchange today. Scotiabank started offering its own ETFs last year while the National Bank of Canada filed with regulators last year for its own funds. RBC recently partnered with BlackRock, the world’s largest ETF provider, to bring a combined $60 billion in assets under management. (Bloomberg)

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Talking point: Canada’s banks have been late to the ETF space compared to the U.S. They’ve been leaving money on the table—Canadian ETFs saw $20 billion of inflows last year lifting assets in the industry to $156.6 billion and outselling mutual funds for the first time since 2009, the Financial Post reports. The banks are following the lead of fintech startups: Coinsquare launched two ETFs last year, and Wealthsimple offers access to third-party ETFs within its portfolios.