Ontario Bans KuCoin, Fines Bybit for Failing to Register

The Ontario Securities Commission (OSC) announced enforcement actions on Wednesday against two of the world’s most popular cryptocurrency exchanges, fining both of them and banning one of them for failing to register with financial regulators.

The commission said Bybit Fintech Limited — or Bybit — forked over more than $2.5 million “and committed to engaging in registration discussions.” It also said it had obtained a court order banning KuCoin while demanding it pay more than $1.5 million to cover “the costs of the OSC’s investigation.”

“Unlike KuCoin, Bybit responded to the OSC’s enforcement action, maintained an open dialogue, provided requested information, and committed to engaging in registration discussions,” the agency said in an afternoon statement. “In addition, while registration discussions are ongoing, Bybit confirms that it will not accept new accounts for Ontario residents, offer any new products to existing accounts held by Ontario investors, or engage in any marketing and promotional activities targeted at Ontario residents. If registration discussions fail, Bybit confirms that it will wind up its Ontario operations.”

“The outcomes announced today should serve as a clear indication that we refuse to tolerate non-compliance with Ontario securities law,” OSC Enforcement Director Jeff Kehoe added in the statement.

The commission said Ontario residents could continue using the British Virgin Islands-based Bybit to trade regular cryptocurrencies — such as bitcoin — but were prohibited from using Bybit’s most popular product, a leverage offering known as “perpetual” contracts. Native to cryptocurrency, so-called “perps” enable users to trade futures contracts that do not expire, and to trade with a magnitude of up to 100 times more than the funds they have on hand.

The same offering is available on KuCoin — which is based in Singapore and the Seychelles Islands — but that exchange is known more for offering a wide range of cryptocurrencies in regular spot trading, including many currencies that are not available on tightly-regulated Western exchanges.

Neither exchange requires users are to provide identification in order to sign up, which has led to friction over the past several with Western regulators and several dictatorships with trading rules that are equally as strict. As of Wednesday, before the enforcement action in Ontario, Bybit’s terms of service reminded users that residents from at least twelve countries or jurisdictions were technically prohibited from using unregulated exchanges — including those from the U.S., Cuba, Iran, North Korea, China, Syria, and the Canadian province of Quebec.