The Canadian Securities Administrators (CSA), an umbrella organization representing securities regulators across Canada’s provinces and territories, has issued guidance regarding the trading and issuance of value-referenced crypto assets, with a specific focus on stablecoins.
In an announcement made on October 5, 2023, the CSA clarified its interim approach, indicating that it may permit the trading of certain cryptocurrencies that are linked to the value of a single fiat currency, subject to certain terms and conditions.
Earlier this year, in February, the CSA reaffirmed its position that stablecoins “may constitute securities and/or derivatives,” a stance that had led to Canadian crypto exchanges being prohibited from trading them.
However, the recent guidance offers a potential path forward for stablecoin trading in Canada. According to the CSA’s statement, if issuers of stablecoins maintain an appropriate reserve of assets with a qualified custodian and crypto exchanges offering these stablecoins provide specific information related to governance, operations, and the reserve of assets that is made publicly available, the CSA may consider permitting the trading of such assets.
CSA Chair and CEO of the Alberta Securities Commission, Stan Magidson, emphasized the importance of this interim framework, which lays down certain standards to ensure that investors have access to essential information about the assets they are purchasing, including associated risks. However, the CSA also cautioned that even if stablecoins meet these criteria, they should still be regarded as risky assets and not endorsed or risk-free.
This move by the CSA follows previous regulatory guidance issued in Canada, including that related to staking in July, which allowed staking but imposed limitations on lending opportunities and the proportion of “illiquid” assets that can be used for staking.
Stablecoins have faced increased regulatory scrutiny worldwide, with various countries seeking to establish clear guidelines for their issuance and trading. In Canada, this guidance is part of an ongoing effort to create a regulatory framework for the crypto industry.
The stablecoin market has experienced fluctuations in market capitalization over the past 18 months and is currently valued at $123 billion, representing approximately 11% of the total cryptocurrency market capitalization. Regulatory clarity in Canada has garnered more institutional interest in the cryptocurrency sector, as reported in August, and this guidance marks a step toward providing more regulatory certainty for industry participants in the country.
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