As the price of Bitcoin climbs to record highs, some Canadians are frantically looking for ways to get into the red-hot crypto market.

“We’ve had a massive amount of interest from retail investors looking to set up accounts,” said Mike Nasser, co-founder of Toronto-based digital currency brokerage Satstreet Inc, in a phone interview.

“The higher the price, the more demand there is,” said Nasser, whose firm, which focuses on high net worth and institutional clients, says it has processed more than $120 million in digital currency trades since launching last year.

Bitcoin soared to what was an all-time high on Monday – before setting yet another record Tuesday - following Tesla Inc.’s disclosure of its US$1.5-billion investment in the cryptocurrency.

“Just [Telsa CEO Elon Musk] putting Bitcoin in his Twitter bio last month sent off a fury of purchasing on our end,” Nasser said.

While downloads of Canadian-based crypto trading apps are surging, many investors and traders are also downloading apps from companies based outside of the country.

According to App Store intelligence firm Apptopia, foreign trading platforms such as Binance, Coinbase, Webull, Uphold and have all seen spikes in downloads this year.

Kraken, a U.S. based cryptocurrency exchange, saw a 192 per cent month-over-month increase in Canadian downloads between December and January, according to Apptopia’s data.

In fact, crypto app demand is outpacing current interest in Canadian banking apps.

Apptopia found that the top crypto trading apps in Canada (Wealthsimple, PayPal, Coinbase, and Binance) added a combined 863,000 new Canadian users in January. By comparison, the top five traditional Canadian banks added 292,000 new app users during the month.

Apps from foreign-based platforms may appeal to certain investors seeking a wider range of cryptocurrencies to trade, but the rapid adoption has raised some eyebrows.

“Canadians would be much better off using an app that is regulated in Canada,” said Daniel Fuke, a partner and securities lawyer at the law firm Fasken, in a telephone interview.

“There are a number of platforms that are ambivalent about where their customers are based,” added Fuke, whose firm previously acted on behalf of Canadian crypto trading platform Coinsquare.

While Canadians routinely invest their money on stock exchanges around the world, regulatory frameworks for crypto trading are much less robust.

Even in Canada, regulation remains in the early innings.

Last year, the Canadian Securities Administrators (CSA) published updated guidance on the matter, stating that “securities legislation may also apply to platforms that facilitate the buying and selling of crypto assets.”

“The CSA would generally like to regulate all of these brokers and exchanges as they do brokers and exchanges of securities,” added Fuke.

Some Canadian players, such as WealthSimple Inc. — known primarily for its stock trading platform — sought regulatory approval before launching its crypto offerings.

While that provided the company with its own framework to follow, there are dozens of other trading platforms that have little contact with securities regulators in Canada. And yet, their crypto apps are being downloaded by Canadians at an equally feverish pace.

“You’re seeing unprecedented amounts of demand. It is a highly speculative type of investment vehicle that people are accessing right now. And we need the same level of principles-based regulation that puts the investor protections first,” said WealthSimple co-founder and CEO Mike Katchen in a recent television interview.

“I would hope Canadians are doing good research and choosing platforms that have a good reputation, rather than falling victim to something more predatory,” added Fuke in the phone interview.

Embedded Image
Mt. Gox CEO Mark Karpeles bows after a press conference at the Justice Ministry in Tokyo, Tuesday, July 11, 2017. AP Photo/Shizuo Kambayashi.

The cryptocurrency world has seen its fair share of fraud over the years.

Canadian cryptocurrency trading platform Quadriga CX collapsed in 2018, in what the Ontario Securities Commission described as a high tech Ponzi scheme.

The 2014 collapse of Tokyo-based Mt. Gox — which had been the world’s largest Bitcoin trading exchange — affected more than 24,000 customers.

“The biggest risk is that you put your money onto a platform and the platform operator won’t give it back,” warned Fuke.

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