The Ontario Securities Commission (OSC) published its final “2018-2019 Statement of Priorities” which details where the OSC will commit its resources and actions. After calling innovative regulation a ‘key focus’, the official statement lists 15 key priority areas and includes a substantial focus on digital currencies.

The broad role of the OSC for the next fiscal year, as part of the wider Canadian Securities Administrators (CSA), is to protect investors, deliver effective compliance, supervise and enforce, regulate, and to promote financial stability.

The OSC begins by acknowledging solid economic growth and strong market activity for Canada to the end of 2017 but calls for further action in 2018 and 2019 to ensure growth and innovation without destabilizing capital markets.

Including blockchain and cryptocurrency in fintech innovation exercises

Ontario aims to modernize its financial services regulatory framework and is creating a Regulatory SuperSandbox and an Ontario FinTech Accelerator Office.

Further, the Ontario Securities Commission Launchpad Initiative is a new collaborative approach formed to respond to emerging issues and is part of the OSC’s priorities to work with fintech businesses to support innovation and capital growth through regulatory compliance.

“The pace of fintech innovation continues to escalate and is a key disruptive force in the financial services industry,” said the statement. “Since October 2016, OSC LaunchPad, has actively engaged with the fintech community to provide support in navigating regulatory requirements.”

The fintech community in Canada now includes many blockchain and digital currency oriented startups which are struggling to navigate an uncertain global and local regulatory landscape.

The OSC aims to keep regulation in line with digital innovation and has created a Fintech Advisory Committee to advise the LaunchPad team on developments and the “unique challenges faced by fintech business in the securities industry.”

The Ontario Securities Commission will also work with the Financial Services Regulatory Authority of Ontario (FSRA) on matters of eligibility and success measures for the Ministry of Finance (MOF) SuperSandbox initiative.

Such sandboxes can provide some regulatory relief for eligible fintech firms, including those innovating in the areas of blockchain and digital currencies, since innovations can be tested and refined before applying to the entire public.

Regulation: monitoring, impact assessments, and guidance for companies

The Launchpad Initiative will help the OSC to both develop regulation and provide support to fintech companies to successfully navigate existing regulatory frameworks.

It forms part of the OSC’s goal to keep regulation in line with initial coin offerings (ICOs) and similar offerings, and blockchain technologies by “conducting ongoing monitoring and reviews of reporting issuers with cryptocurrency and blockchain businesses.” The OSC will be “including those seeking to become reporting issuers through reverse takeovers or initial public offerings and existing reporting issuers that are involved in change of businesses transactions.”

It will also liaise with those listing ICOs, and the CSA, “to identify and discuss industry developments and consider the impact on disclosures.” Enhanced guidance will be offered where ICOs and similar offerings are deemed to involve securities.

Cybersecurity another key priority for the Ontario Securities Commission

As financial services providers are becoming increasingly digitized, cybersecurity also features highly in the OSC’s priorities. The increased number and sophistication of cyber attacks, it says, poses a major and growing risk for market participants and regulators.

Cybersecurity is a particular issue for digital currency businesses, exchanges, and investors due to the frequency of hacks and occurrences of malware programs. Though the OSC do not directly connect cybersecurity and digital currencies in the statement, the OSC will be promoting awareness, resilience, and coordination in the forthcoming year.

The OSC has forecast an increase in its yearly operating costs to “address emerging regulatory issues such as fintech, crypto-assets, initial coin offerings and capital raising in the cannabis sector.”

Priorities for the OSC in the coming fiscal period, unsurprisingly, include a major focus on supporting and regulating the growing fintech sector. With Toronto emerging as a global centre for blockchain technology and digital currencies, the OSC will certainly need to be both proactive and efficient in terms of protecting investors and supporting the new digital economy.

 

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