On October 22, 2025, the Canadian Securities Administrators (CSA) published a reminder reinforcing its position that platforms that facilitate crypto-backed lending may be considered to be engaged in trading or distributing securities.1 The CSA specifically cautioned investors about the risks of engaging with unregistered platforms. Crypto-backed lending arrangements involve borrowers pledging crypto assets as collateral to access liquidity. This reminder builds on prior guidance clarifying that such activities can trigger obligations under securities law,2 such as registration under National Instrument 31-103 – Registration Requirements, Exemptions, and Ongoing Registrant Obligations and prospectus filing under National Instrument 41-101 – General Prospectus Requirements, subject to an applicable exemption.
The CSA has previously granted exemptive relief to certain platforms under strict conditions designed to protect investors, including enhanced disclosure about loan terms, internal controls to safeguard collateral, and clear communication about investor rights.3
As an example, in April 2025, the Ontario Securities Commission (OSC) approved time-limited relief including registration and prospectus exemptions for APX Inc.,4 a platform offering crypto-backed loans, from certain registration and prospectus requirements. The decision acknowledged that a borrower’s contractual rights relating to the crypto asset collateral and related rights under the borrower’s agreement with a lender could be considered a security. This relief was subject to strict conditions imposed on APX Inc. to ensure the safeguarding of investor assets, including custody, recordkeeping, and know-your-product and know-your client obligations.
The CSA’s message is clear: platforms engaged in crypto-backed lending should proactively engage with regulators, comply with prescribed requirements and seek exemptive relief where appropriate.
Implications for Platforms and Market Participants
Platforms offering crypto-backed loans should review their business models to determine whether they fall within the scope of securities regulation. Provincial securities commissions will consider the relationship between the lender and borrower, and whether the lending arrangements themselves may be properly construed as a trade or distribution of a security. Absent further legislative changes, this analysis will continue to include reference to the investment contract test provided by the Supreme Court of Canada in Pacific Coin, which requires an investment of money in a common enterprise with the expectation of profits to be derived from the efforts of others.5 Early engagement with regulators can help clarify obligations and avoid contraventions of securities laws. Platforms that fail to comply are at risk of facing enforcement actions and reputational harm.
For investors, verifying a platform’s regulatory status is the first step. The CSA does not suggest all lending is captured. Platforms may (a) not be subject to securities laws, (b) be registered as a marketplace or dealer, or (c) be operating under exemptive relief from the securities laws. If a platform is neither registered nor operating under exemptive relief, investors should question the operator’s analysis and exercise caution before engaging further.
Investor Protection at the Forefront
The CSA’s warning to investors underscores the risks of dealing with unregistered platforms. These risks include inadequate internal controls to safeguard collateral and misleading or incomplete disclosure about loan terms. Investors are urged by the CSA to verify whether a platform is registered or operating under exemptive relief before entering into any lending arrangement.
This reminder reflects the CSA’s broader mandate to maintain market integrity and protect investors in Canada’s evolving crypto asset industry. It also signals that regulatory oversight will continue to adapt as new products and services emerge.
The CSA’s Jurisdiction Over Crypto Assets
The CSA’s reminder should also be considered in light of an August 2025 decision by Québec’s Financial Markets Administrative Tribunal (FMAT) in Autorité des marchés financiers (AMF) v. Gagnon,6 where the FMAT considered whether the crypto-trading activities conducted by the defendants constituted investment contracts and were therefore securities. FMAT held that the respondents’ scheme of managing crypto assets on the Uniswap decentralized exchange and taking a share of trading profits constituted investment contracts under the Québec Securities Act (the Act) definition of “investment contract.”
The AMF also alleged that the respondent’s “pump and dump” scheme constituted market manipulation; however, FMAT held that because the AMF could not demonstrate that the crypto assets promoted by the respondents were securities, the respondents were not in violation of the Act. Citing the Southern District of New York in its SEC v Ripple case,7 FMAT held that these were speculative trades on the secondary market, and thus were not investment contracts. Importantly, AMF v. Gagnon emphasized that crypto assets are not inherently securities, but may be traded or distributed as part of an investment contract “depending on the economic reality surrounding a transaction involving that crypto asset.”8
AMF v. Gagnon signals that, despite their assertion of jurisdiction over crypto-trading platforms, the CSA member regulators must continue to regulate within their legislative ambit until legislatures expressly grant specific jurisdiction over all crypto assets, or until all crypto assets are explicitly included under the definition of a “security” under Canada’s various securities laws.
Looking Ahead
While the CSA’s communication does not introduce new rules, it reinforces its policy position that existing securities laws may apply to crypto-backed lending. Platforms should treat this as an opportunity to strengthen compliance frameworks and build trust with users. For investors, informed decision-making remains essential in navigating the risks of this emerging market. In the case of APX Inc., while granting exemptive relief, the OSC emphasized that such relief is tailored and not precedential. Rather, the case reinforces that exemptions will only be provided on a case-by-case basis, highlighting the importance of seeking legal advice to help you or your organization get appropriate relief and ensure compliance.
At Cassels, we will continue to monitor changes to the regulatory framework for crypto assets both at home in Canada and abroad. If you or your organization are looking for assistance, we encourage you to reach out to members of our Blockchain & Digital Assets Group or Capital Markets Group.
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1 Canadian Securities Administrators, CSA reminds crypto-backed lending platforms of potential regulatory requirements, and cautions investors over risks (22 October 2025), online: CSA <www.securities-administrators.ca>.
2 Canadian Securities Administrators, CSA Staff Notice 21-327 – Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets (16 January 2020), online: OSC <www.osc.ca>.
3 Canadian Securities Administrators, CSA Notice – Amendments to National Instrument 81-102 Investment Funds Pertaining to Crypto Assets (17 April 2025), online: OSC <www.osc.ca>.
4 Ontario Securities Commission, In the Matter of APX Inc. (1 April 2025), online: OSC <www.osc.ca>.
5 Pacific Coast Coin Exchange of Canada Ltd v Ontario Securities Commission, 1977 CanLII 37 (SCC), [1978] 2 S.C.R. 112.
6 Autorité des marchés financiers v Gagnon, 2025 QCTMF 56, online: AMF <lautorite.qc.ca>.
7 SEC v Ripple Labs, Inc, Bradley Garlinghouse and Christian A. Larsen, 20 Civ. 10832 (AT).
8 AMF v Gagnon, supra note 6 at para 93.