I am exploring regulations in Canada and one of the issue is custody of the wallet and private key. Who has custody of the wallet? Do they reside on my server or on the HollaEx network? I am trying to see what needs to be done to be 100% legal in Canada.
This is what I found about the wallets in the whitepaper: There are two wallet systems designed within the system: Internal and External. Internal wallet system refers to the user wallet and balance within the system which is designed as an internal ledger for internal purposes. This wallet is used for all trades and internal transfer of assets. The external wallet refers to the custodial wallet which holds the actual crypto assets.
The custodial wallet is out of the scope of HollaEx Core default coin management. Albeit, there are external custodial wallet management systems including bitHolla Vault or Bitgo which can be added as a plugin to the system. As a result the custody service is provided as a separated plugin that connects to a secure service environment that manages all the secure elements and private keys.
So who owns the private key for the external wallet? Where does it reside? Who is responsible for it? The external wallet refers to the custodial wallet which holds the actual crypto assets. Thanks!
There are two types of exchanges:
- Public (Freely available that connects to the public HollaEx Network)
- Private (Enterprise)
If you are referring to the public network and running a DIY exchange, the wallets are managed and operated by HollaEx and the company provides the custodial wallet service.
In the private case, you will have a full exchange and custody built in on your premise and you will be the custodial. You also have the option to use other wallet services or custody services.
By the sound of your question I assume it is important for you to manage and operate your wallets within your jurisdiction so you would definitely need to go with the second option. I briefly heard about the new exchange licenses in Canada and as far as I know you need to have full control over your wallet system yourself so the first option might not really be viable in your case in my humble opinion but you better check that for yourself.
Actually, since I don’t control the private key and wallet, I think I don’t need to be registered. I am checking with a specialized lawyer right now to see what is needed. Its either you register as an exchange if you control the wallet or as a money service if you sell cryptos to your users. I will update the thread with the info once I get it. Thanks!
Thats interesting. Are you trying to have CAD on your exchange? If not there is no point in having the exchange registered in Canada.
My company is registered in Canada and I wanted to make sure that I am following all legislations. The first reason is if you sell crypto which I don’t as I send them to Paytrie.com for that. The second reason is if you have custody of the wallet and private key which I don’t. Based on that, there is no need to be licensed by the Canadian Securities Administration (https://www.securities-administrators.ca).
P.S. I am still waiting for the lawyer’s opinion on the matter.