March 27, 2024
Canadian Regulator Provides Stablecoin Guidelines for Exchanges and Issuers
Policy & Regulation

Canadian Regulator Provides Stablecoin Guidelines for Exchanges and Issuers

The Canadian Securities Administrators (CSA) has issued guidance regarding its interim approach to “value-referenced crypto assets,” with a particular focus on stablecoins. On October 5th, the CSA, which is the umbrella organization of Canada’s provincial and territorial securities regulators, published a clarification indicating that it might permit the trading of certain cryptocurrencies that are tied to the value of a single fiat currency, subject to specific terms and conditions.

Back in February, the CSA reiterated that stablecoins “may constitute securities and derivatives,” which Canadian crypto exchanges were prohibited from trading. However, if issuers maintain an appropriate reserve of assets with a qualified custodian, and crypto exchanges offering stablecoins disclose “certain information related to governance, operations, and reserve of assets” publicly, then the CSA could potentially allow the trading of these assets. CSA Chair and CEO of the Alberta Securities Commission, Stan Magidson, stated:

“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.”

The CSA emphasized that even if fiat-backed crypto assets meet the specified terms, they still carry risks and should not be considered officially endorsed or risk-free. The regulatory clarity in Canada has spurred increased interest in crypto from institutional investors.

In July, the CSA issued guidance regarding staking, indicating that it was permissible, but opportunities for lending were limited, and there were restrictions on the proportion of “illiquid” assets.

The stablecoin market capitalization has experienced a decline over the past 18 months or so and currently stands at $123 billion, constituting approximately 11% of the total crypto market capitalization.

Image by pvproductions on Freepik

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