Understanding investment limits
As a crypto investor it is essential that your money is not invested unsuitably to allow you to manage unacceptable losses. For this reason, investment limits were introduced by the law to manage the total exposure to investors. An investment limit is the amount that an investor is restricted to in a 12 month period. It is calculated by consolidating your buy and sell transactions made over a span of 12 months and compared to a maximum risk exposure that fits your investor profile (i.e. the outcome of your suitability assessment).
This investment limit is enforced on a trade-by-trade basis, and is applicable to all crypto assets except Bitcoin, Ethereum, Bitcoin Cash and Litecoin (collectively referred to as the specified assets).
Types of investors and their applicable limits:
|Type of Investor||Investment Limit||Investment Period|
|Accredited Crypto investor||No Limit||N/A|
|Eligible investor||$100,000||12 months|
|All other investors||$30,000||12 months|
For more information on the definition of accredited and eligible crypto investors, please consult this document.
Example of calculation:
On January 1st, John Doe buys 5,000 ABC coins priced at $1 each.
- Before that transaction, John’s limit was $30,000
- After that transaction, John's limit is $30,000 - (5,000 x $1) = $25,000
On January 15th, John Doe buys 2,000 XYZ coins priced at $0.5 each.
- Before that transaction, John's limit was $25,000
- After that transaction, John’s limit is $25,000 - (2,000 x $0.5) = $24,000
On June. 15th, the price of ABC goes to $1.5 and John decides to sell his entire position
- Before that transaction, John's limit was $24,000
- The sale of 5,000 ABC coins generated 5,000 x $1.5 = $7,500
- After that transaction, John's limit is now $30,000. Although the sale of 5,000 ABC coins could bring John’s balance to $24,000 + $7,500 = $31,500, John’s limit cannot exceed $30,000. As a result, John’s limit returns to $30,000 and he can collect his profit of $1,500 in Canadian dollars.