Regulators continue to consider the risks in the burgeoning digital assets markets
The Canadian Securities Administrators has issued guidance to crypto trading platforms on value-referenced crypto assets some of which are called ‘stablecoins’.
While platforms cannot legally trade crypto assets that are securities and/or derivatives, the CSA understands that “value-referenced crypto assets may have certain uses for the Canadian clients of crypto asset trading platforms.”
It has issued interim terms and conditions that would apply to crypto asset trading platforms and the issuers of fiat-backed crypto assets if they wish to continue allowing Canadian clients to purchase or deposit these assets.
The guidance refers to fiat-backed crypto assets, while making it clear to investors that these are not fiat currencies and are subject to various risks.
“The transparency of value-referenced crypto assets about the composition and adequacy of their reserves and their governance are critical issues that must be addressed to protect Canadian investors and the integrity of our capital markets,” said Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission. “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 says it welcomes feedback on the long-term regulation of value-referenced crypto assets and its interim terms and conditions, updated on October 5, 2023, followed consultation with Canadian crypto market participants and includes:
- The issuer of the value-referenced crypto asset must maintain an appropriate reserve of assets with a qualified custodian, held for the benefit of the crypto asset holder.
- The issuer of the value-referenced crypto asset and crypto asset trading platforms that offer them must make certain information related to governance, operations and reserve of assets publicly available.
However, the CSA says that even when assets comply with the full terms and conditions available on securities regulators’ websites, investors should not take this as an endorsement or approval or believe that the investors are risk free.
