The Canadian Securities Administrators (CSA), representing securities regulators across Canada, has issued guidance regarding the trading and issuance of value-referenced crypto assets, with a particular focus on stablecoins. The CSA’s interim approach outlines conditions for both cryptocurrency issuers and exchanges.
Conditions for Trading Stablecoins
On October 5th, the CSA clarified that it may permit the trading of specific cryptocurrencies that are pegged to the value of a single fiat currency, contingent upon certain terms and conditions. Earlier in February, the CSA had reaffirmed its stance that stablecoins “may constitute securities and/or derivatives,” thereby prohibiting Canadian crypto exchanges from trading them.
Requirements for Issuers and Exchanges
To potentially allow the trading of such assets, issuers must maintain an appropriate reserve of assets with a qualified custodian. Furthermore, crypto exchanges offering stablecoins must make certain information related to governance, operations, and asset reserves publicly available. This move aims to enhance transparency and provide investors with crucial information about the assets they are purchasing.
CSA Chair Stan Magidson, who is also the CEO of the Alberta Securities Commission, explained:
“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.”
Despite these regulatory conditions, the CSA emphasized that fiat-backed crypto assets, even if they meet the stipulated terms, still carry risks. Investors should not perceive them as officially endorsed or entirely risk-free.
Impact on the Crypto Landscape in Canada
Regulatory clarity in Canada has led to increased interest in cryptocurrencies from institutional investors, as reported in August. The CSA previously issued guidance on staking, indicating that it was allowed but placed restrictions on lending opportunities and the proportion of “illiquid” assets.
Stablecoin Market Trends
The market capitalization of stablecoins has experienced a decline over the past 18 months, currently standing at $123 billion, representing approximately 11% of the total cryptocurrency market capitalization. These developments in Canada come at a time when stablecoins continue to play a pivotal role in the broader crypto ecosystem.