The Canadian securities regulator, the Ontario Securities Commission, has accused the cryptocurrency exchange Poloniex of flouting Ontario securities law.

The regulator filed a statement of the allegation on Tuesday, claiming that Poloniex failed to seek approval as a crypto trading platform operating in the province.

The Canadian agency identified Poloniex's crime of holding digital assets in custody as a third party and argued that any assets held on a trading platform could be securities. The regulator went on to explain:

“While Poloniex purports to facilitate the trading of the crypto assets in its investors' accounts, in practice, Poloniex only provides its investors with instruments or contracts involving crypto assets. These instruments or contracts constitute securities and derivatives.”

The regulator currently seeks CA$1 million ($830,000) fines for each “failure to comply.” The first hearing on the matter is scheduled for June 18.

The OSC had previously warned crypto exchanges in the province that trade securities and derivatives to get in contact with the regulator or face regulatory action.

The agency set a deadline of April 19, 2021, for exchanges to comply with the registration requirement, which had more than 70 exchanges in compliance. However, Poloniex did not take part.

As the crypto market encounters a volatile period amid worldwide support, regulators have become more cautious about enforcing regulations.

However, one thing that has stirred confusion regarding cryptocurrency regulations is identifying what type of digital assets are labeled as securities. In the US, regulators like the Securities and Exchange Commission have targeted crypto firms for selling tokens as unregistered securities.

A good example is Ripple Inc, the payment solutions provider sued by the SEC in December last year for allegedly selling its XRP tokens in unregistered security offerings to investors. In March, the SEC also sued crypto startup LBRY Inc, accusing the company of selling unregistered securities in the form of its token.

Unlike the US, Canada has been more friendly regarding crypto regulations. The North American country is also the first to support Bitcoin exchange-traded funds (ETF) in the region.

This year the OSC already approved three Bitcoin ETF issuers. The first two approved include the Purpose Bitcoin ETF (BTCC) and the Evolve Bitcoin ETF (EBIT), both listed on the Toronto Stock Exchange.

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