Canadian crypto industry brushing off concerns about sector in wake of US$40B collapse of Luna token
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Loading... - Debora Costa
- 26 May 2022
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Some of Canada’s largest cryptocurrency exchanges are brushing off concerns about the sector after a recent bout of volatility exacerbated by the dramatic collapse of the TerraUSD stablecoin and its related Luna token.
TerraUSD (also denoted as UST) is a stablecoin native to the Terra blockchain network that used an algorithm to peg its value to the U.S. dollar through Luna. But after Luna’s market cap rose to as much as US$40 billion, the peg began to break down this month, precipitating a run on the tokens, which lost 99.9 per cent of their value within a matter of days earlier in May. The trouble spilled over into the wider crypto market as well, with the values of Bitcoin and Ethereum both tumbling more than 17 per cent between May 7 and May 11.
At least three of the seven fully regulated exchanges in Canada — Bitbuy, Wealthsimple and Coinberry — offered Luna or UST for trading. In some cases, they had only been available for a few months.
All three of those exchanges told the Financial Post they suspended trading in Luna assets shortly after the crash began on May 9. None would specify the amount customers lost in Luna trading as a result of the collapse.
In response to questions from the Financial Post, the Canadian Securities Administrators, an umbrella organization of Canada’s provincial and territorial securities regulators, said it is actively monitoring emerging “technology-related” regulatory issues.
“We are working to monitor and assess the presence and role of stablecoins in Canadian capital markets, and to identify and respond to regulatory implications and risks,” the CSA secretariat said in an e-mail.
In response to questions about whether regulators must approve the listing of individual coins and tokens, the CSA directed the Financial Post to two clauses in the decisions granting exchanges regulatory approval. The first clause outlawed exchanges from listing tokens that fit the definition of securities or derivatives. The second indicated that written consent of the securities regulator in their jurisdiction was required if the cryptocurrency was issued on behalf of a person or company that had been the subject of regulatory sanction in the last five years.
Other than “know your product” policies, which require exchanges to review technical, legal and regulatory risk as well as monitor assets for major changes, there appeared to be no other specific restrictions on the listing of cryptocurrencies, which was left up to the discretion of exchanges.
Luna’s collapse reverberated through markets, hitting exchanges that had not even carried the token on their platforms, but those in the industry who spoke to the Post described the impact as temporary.
“There were some nerves obviously from people,” said Jeremy Koven, the chief operating officer and co-founder of Coinsmart, which did not hold Luna at the time but saw selloffs in other assets. “We looked at our flows we (did) see a little bit more selling than buying … when this was going on.”
Michael Arbus, chief executive officer at Toronto-based Bitbuy, told the Post that the number of users affected on their exchange was small, given that the asset was delisted within a week. He also said that buyers emerged as prices of other assets declined.
“(We saw) an exogenous event occur which was Luna, which triggered a one-day drop in bitcoin which completely changed the dynamic, and it became obvious that the interest in bitcoin at these prices (started to grow),” he said. “May has been the single best month for Bitbuy as an exchange operator in trading activity as well.”
Andrei Poliakov, chief executive officer and co-founder of the Toronto-based crypto brokerage Coinberry, told the Financial Post that failed projects like Terra/Luna are part of the iterative process that is helping the cryptocurrency sector turn into a more mature industry.
Poliakov said investors are past the narrative that crypto is “here today, gone tomorrow” and are more interested in what innovations the sector will bring. Read More…
