Key takeaways:
- With a focus on stablecoins, the CSA has offered guidelines to exchanges and cryptocurrency issuers on its interim approach.
- Stablecoins “may constitute securities and/or derivatives,” which Canadian cryptocurrency exchanges are not allowed to trade.
With a focus on stablecoins, the Canadian Securities Administrators (CSA) has offered guidelines to exchanges and cryptocurrency issuers on its interim approach to what it refers to as value-referenced crypto assets.
Various cryptocurrencies that reference the value of a single fiat currency may be traded, subject to specific restrictions and limitations, according to a clarification published on October 5 by the umbrella organization of Canada’s provincial and territory securities authorities.
Stablecoins “may constitute securities and/or derivatives,” which Canadian cryptocurrency exchanges are not allowed to trade, according to the CSA, which reiterated this position in February.
But if issuers keep a sufficient reserve of assets with a licensed custodian and stablecoin-supporting crypto exchanges publish “certain information related to governance, operations, and reserve of assets publicly available,” the CSA might permit trading of those assets.
Stan Magidson, CEO of the Alberta Securities Commission and Chair of the CSA, issued the following statement:
“This interim framework, which we will build upon in the future, sets certain standards to help ensure that investors receive the information they need about the assets they are purchasing, including the risks associated with them.”
The CSA issued a warning, stating that even crypto assets backed by fiat that adhere to the criteria are nonetheless dangerous and shouldn’t be taken as endorsed or low-risk.
Institutional interest in cryptocurrencies increased in August as a result of regulatory clarification in Canada. The CSA published guidance on staking in July, indicating that it was permitted but that there were few lending opportunities and that the percentage of “illiquid” assets must not exceed a certain level.
The market capitalization of stablecoins has decreased over the previous 18 months or so and is now at $123 billion, or around 11% of the entire market capitalization of all cryptocurrencies.
