Canada CSA clarifies that fiat-pegged stablecoins are fair game

Rick Steves

“The matter of transparency and governance of value-referenced crypto assets is crucial for safeguarding Canadian investors and the sanctity of our capital market.”

In a move to set the regulatory tone for stablecoins, the Canadian Securities Administrators (CSA) has issued an advisory that offers additional details on its interim stance concerning the trading of value-referenced crypto assets, commonly known as “stablecoins.”

The directive comes on the heels of the CSA’s prior affirmation that these value-referenced assets could be classified as securities and/or derivatives.

Stablecoin issuers must maintain adequate reserves held with a qualified custodian

While crypto trading platforms in Canada are banned from facilitating trades involving crypto assets deemed securities or derivatives, the CSA has noted potential utility for such value-referenced assets among Canadian clients. Consequently, the regulator has indicated a willingness to allow the continued trading of certain stablecoins pegged to single fiat currencies, albeit under specific terms and conditions.

“The matter of transparency and governance of value-referenced crypto assets is crucial for safeguarding Canadian investors and the sanctity of our capital markets,” stated Stan Magidson, Chair of CSA and CEO of the Alberta Securities Commission. “This interim framework will establish baseline norms and will be iteratively enhanced to equip investors with vital information, including associated risks.”

The CSA’s interim guidelines have been influenced by input from participants in Canada’s crypto market, as well as by emerging international norms and regulations. Key provisions include:

  • Issuers must maintain an adequate reserve of assets, held for the benefit of the asset holder, with a qualified custodian.
  • Both issuers and crypto trading platforms should make publicly available specific information about governance, operations, and asset reserves.

The CSA has outlined these terms and conditions in CSA Staff Notice 21-333, available on its member websites, offering a detailed blueprint for crypto asset trading platforms that wish to continue allowing their Canadian clients to purchase or deposit value-referenced crypto assets.

The CSA emphasized that satisfying these interim conditions does not equate to an endorsement or risk-free status for the asset. It invites further discourse on long-term regulation and alternative criteria for other types of value-referenced crypto assets.

Today’s announcement by the CSA marks a nuanced approach in a regulatory landscape often seen as a minefield for crypto asset trading platforms and stablecoin issuers.

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