In a move aimed at providing clarity to the cryptocurrency industry, the Canadian Securities Administrators (CSA), the umbrella organization for Canada’s securities regulators, has outlined conditions for trading and issuing stablecoins. The guidance focuses on value-referenced crypto assets, commonly known as stablecoins, and lays down specific requirements for both issuers and cryptocurrency exchanges.
On October 5th, the CSA released a statement detailing its interim approach to value-referenced crypto assets, with a particular emphasis on stablecoins. The regulatory body clarified that it may permit the trading of certain cryptocurrencies that are tied to the value of a single fiat currency, subject to certain terms and conditions.
Earlier this year, in February, the CSA had expressed its view that stablecoins could be considered securities and/or derivatives, making it illegal for Canadian crypto exchanges to trade them. However, the recent statement introduces a more nuanced approach.
The CSA’s guidance stipulates that for stablecoins to be considered for trading in Canada, issuers must maintain an appropriate reserve of assets with a qualified custodian. Additionally, cryptocurrency exchanges offering stablecoins must make specific information related to governance, operations, and the reserve of assets publicly available. This move is aimed at enhancing transparency and risk mitigation within the industry.
Stan Magidson, the Chair and CEO of the Alberta Securities Commission and Chair of the CSA, emphasized that while these conditions might open the door for certain stablecoins, they should still be viewed as risky assets and not endorsed or risk-free by the CSA.
In August, it was reported that the increasing regulatory clarity in Canada had generated greater interest in cryptocurrencies from institutional investors. This development suggests that as regulators provide more structured guidelines, traditional financial institutions are becoming more open to embracing the crypto market.
CSA’s previous guidance on Stablecoins
This recent guidance follows the CSA’s prior statements on other aspects of the crypto industry. In July, the CSA issued guidelines on staking, indicating that it was allowed. However, lending opportunities were limited, and there were restrictions on the proportion of “illiquid” assets.
Over the past 18 months, the market capitalization of stablecoins has been in decline and currently stands at $123 billion, representing approximately 11% of the total cryptocurrency market capitalization. While this decline could be attributed to various factors, including regulatory uncertainties, the CSA’s new approach may have a positive impact on the stablecoin market.
