The overarching body representing regulators for the Canadian securities industry has outlined a set of conditions governing the trading and issuance of stablecoins. The Canadian Securities Administrators (CSA) have proffered comprehensive guidance to cryptocurrency exchanges and issuers concerning their interim strategy regarding what they refer to as “value-referenced crypto assets,” with a specific emphasis on stablecoins.
On the 5th of October, the umbrella organization encompassing provincial and territorial securities regulators in Canada released a clarification, indicating its potential willingness to permit the trading of specific cryptocurrencies tethered to the value of a single fiat currency, contingent upon prescribed terms and conditions. Earlier in February, the CSA reiterated its stance that stablecoins “may constitute securities and/or derivatives,” which Canadian crypto exchanges are proscribed from trading.
Nevertheless, there exists a window of opportunity. If issuers maintain an appropriate reserve of assets with a qualified custodian, and if crypto exchanges that deal in stablecoins make “certain information related to governance, operations, and asset reserves” publicly accessible, then the CSA might consider allowing the trading of these assets. Stan Magidson, Chair and CEO of the Alberta Securities Commission, who also serves as the CSA Chair, articulated in a statement, “This interim framework, upon which we will continue to build in the future, establishes specific standards aimed at ensuring that investors receive comprehensive information about the assets they are acquiring, including the associated risks.”
It’s essential to note, however, that the CSA has issued a cautionary advisory. Fiat-backed crypto assets that satisfy these terms are by no means devoid of risk and should not be misconstrued as being officially endorsed or devoid of risk.
In a report from August, Cointelegraph highlighted that the newfound regulatory clarity in Canada has sparked increased interest in cryptocurrencies among institutional players. Back in July, the CSA issued directives regarding staking, indicating its permissibility, albeit with limited lending opportunities and restrictions imposed on the proportion of “illiquid” assets.
Over the past 18 months, the market capitalization of stablecoins has experienced a notable decline and currently stands at $123 billion, representing approximately 11% of the total cryptocurrency market capitalization.
