CSA Offers Interim Guidance on Trading Stablecoins

The Canadian Securities Administrators (CSA) has guided exchanges and cryptocurrency issuers on its interim approach to what it calls value-referenced crypto assets, with a particular focus on stablecoins.

The umbrella organization of Canada’s provincial and territorial securities regulators published a clarification on October 5 stating that, subject to certain conditions, it may permit trading of certain cryptocurrencies that reference the value of a single fiat currency.

In February, the CSA reaffirmed its position that stablecoins “may constitute securities and/or derivatives,” which are prohibited for trading on Canadian crypto exchanges.

1However, if issuers maintain an adequate reserve of assets with a qualified custodian and crypto exchanges offering stablecoins make “certain information related to governance, operations, and reserve of assets publicly available,” the CSA could permit trading of these assets.

Stan Magidson, Chair of the Canadian Securities Administrators and Chair and CEO of the Alberta Securities Commission, said in a statement that fiat-backed crypto assets satisfying the terms are still risky and should not be regarded as endorsed or risk-free.

“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.”

In August, it was reported that regulatory clarity in Canada led to an increase in institutional interest in cryptocurrencies.

The CSA issued guidance on staking in July, stating that it was permitted but that lending opportunities are limited and the proportion of “illiquid” assets is constrained.

The market capitalization of stablecoins has decreased over the past 18 months or so and is currently around 11% of the total crypto market cap at $123 billion.