Canadian financial regulatory authorities are considering putting in place rules for cryptocurrency exchanges in the country.

The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) published a consultation paper on Thursday, seeking input from the fintech community on how regulatory requirements can be developed for cryptocurrency platforms.

“The emergence of digital and crypto assets continues to be a growing area of interest,” said Andrew J. Kriegler, president and CEO of the IIROC in a separate statement on Thursday, adding:

“We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”

Considering the “novel” features and risks of cryptocurrencies, the regulators proposed applying securities laws wherever applicable.

For instance, if cryptocurrencies are securities and/or derivatives traded on an exchange, that exchange would be subject to securities and/or derivatives regulatory requirements, they said. Most “utility tokens” have involved the distribution of securities, usually as investment contracts, they added.

The agencies are of the view that cryptocurrency platforms are hybrid in nature, meaning they can perform functions of one or more market participants, including alternative trading systems, exchanges, dealers, custodians and clearing agencies.

Therefore, they are considering the preparation of a set of “tailored” regulatory requirements to address the risks and features of cryptocurrency platforms.

Currently, none of the cryptocurrency exchanges in Canada is recognized as an exchange nor is authorized to operate as a marketplace or dealer, according to the paper.

The recent QuadrigaCX saga highlighted the lack of regulations covering the cryptocurrency industry in Canada.

The Canadian cryptocurrency exchange’s CEO, Gerald Cotten, died last December, apparently without leaving a way for staff to access the computer storing the failing exchange’s funds. QuadrigaCX still owes its customers roughly $190 million in both cryptocurrency and fiat.

Last month, the securities watchdog in the Canadian province of British Columbia, the British Columbia Securities Commission (BCSC), said that it has no remit to regulate the troubled exchange.

The CSA and IIROC consultation paper is open for public comment until May 15.

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