The Canadian Securities Administrators (CSA) warned investors yesterday (Tuesday) against cryptocurrency service providers that are "claiming to be authorized or affiliated with fictitious regulatory or dispute resolution organizations."
A 'Mistake' by Canadian Regulator
The regulator also named ten regulatory or dispute resolution organizations and labeled them as 'fake'. Though most of these organizations do not have any online presence, the names include the Financial Commission and its affiliate, the Blockchain Association.
The Financial Commission is well-known in the trading services industry. Its members include popular forex and contracts for differences (CFDs) brokers like Exness, Pepperstone, Axi, Libertex, IC Markets, RoboForex, and many more.
As members of the Financial Commission, brokers receive several services, including mediation for dispute resolution and access to a compensation fund for disputes resolved by the Commission. The deposit protection provided by the fund is beneficial to member brokers' clients that operate under regulators without such compensation schemes.
The organization further maintains strict membership rules and has expelled several brokers over the years for non-compliance.
Response from the Financial Commission
"We disagree with the information in the CSA's notice and believe the regulator made a mistake," a Financial Commission spokesperson told Finance Magnates. "We have already engaged legal counsel in Canada and preparing a submission to CSA to remove this designation. We expect this issue to be resolved soon."
"Given our experience, it is likely that unknown individuals cloned or copied our membership certificates to pursue possible fraudulent activity involving online scams, which we actually actively work to identify and actually warn the public about on a consistent basis."
Indeed, the Financial Commission is also struggling with its clones. It flagged a clone website earlier this year that was trying to dupe brokers. The cloned website listed GANN Markets and Lotas Capital as active members of The Financial Commission, whereas both these brokers lost their membership status last year and are now on FinCom's warning list.
On top of that, the Canadian regulator's warning was specific to crypto trading, not FX/CFDs. Most of the Financial Commission members are FX/CFDs brokers with only five companies from the blockchain space.
"The Financial Commission has conducted dispute resolution services specifically for FX and CFD traders and broker member firms since 2013 as an independent, non-governmental self-regulatory organization and external dispute resolution (EDR) service, funded by membership dues collected from its broker members," the private mediator explained in a statement published on its website on Wednesday. "The organization does not accept or process complaints related to trading or storing digital assets, such as cryptocurrencies and tokens."
Meanwhile, the blockchain unit of the Financial Commission, the Blockchain Commission, is now dormant.
"The Blockchain Association was created in 2018 on the basis of the Financial Commission as an association to unite professionals in the blockchain space for collaboration on and development of sensible best practices for using blockchain technology, including a dispute resolution service for crypto traders and their exchanges/blockchain projects," the spokesperson added. "The Association had a handful of members over the years but has not provided any services in the last two years and is currently in a dormant state."
