On October 5, the Canadian Securities Administrators (CSA), the umbrella organization for provincial and territorial securities regulators in Canada, issued crucial guidance on trading and issuing stablecoins. The regulatory body set conditions for cryptocurrency exchanges and issuers dealing with value-referenced crypto assets. This was with a specific emphasis on stablecoins.
Conditions for Trading Cryptocurrencies
The CSA, in its interim approach, outlined conditions under which certain cryptocurrencies, referencing the value of a single fiat currency, may be traded. The regulatory body emphasized that this permission is subject to specific terms and conditions.
In February, the CSA had previously stated that stablecoins could be considered securities and/or derivatives. This was what led to their prohibition in Canadian crypto exchanges. However, the recent clarification suggests a potential shift in this stance.
Requirements for Issuers and Exchanges
To be eligible for trading, issuers must maintain an appropriate reserve of assets with a qualified custodian. Additionally, crypto exchanges offering stablecoins need to disclose key information related to governance, operations, and asset reserves publicly.
CSA Chair and CEO of the Alberta Securities Commission, Stan Magidson, highlighted the significance of the interim framework. He stated,
“This framework, which we will enhance in the future, establishes standards to ensure investors receive necessary information about purchased assets, including associated risks.”
Cautionary Note on Risk
Notably, the CSA acknowledges the potential for trading under certain conditions. However, it emphasized that fiat-backed crypto assets meeting these terms are still inherently risky. Investors are cautioned not to perceive them as endorsed or risk-free.
In a statement, Magidson reiterated the importance of investor awareness, emphasizing the need for transparency in the crypto market.
Previous Guidance on Staking
This recent clarification follows the CSA’s previous guidance in July, where staking was deemed permissible. However, the CSA noted limitations on lending opportunities and restrictions on the proportion of “illiquid” assets.
Over the past 18 months, the stablecoin market capitalization has seen a decline. It is currently standing at $123 billion, representing approximately 11% of the total crypto market cap.