Canadian Regulators Issue Interim Guidance on Stablecoin Trading, Highlighting Risks
Summary:
The Canadian Securities Administrators (CSA) has issued guidance to cryptocurrency exchanges and issuers about trading value-referenced crypto assets, particularly stablecoins. According to the clarification, trading certain cryptocurrencies might be allowed if they maintain a value equivalent to a single fiat currency and meet specific conditions. The interim structure aims to ensure investors understand the associated risks. CSA highlighted that crypto assets tied to fiat currency are still risky and not risk-free, despite satisfying the terms. The organization reaffirmed its stance from February that stablecoins might qualify as securities and/or derivatives.
The Canadian Securities Administrators (CSA) has recently offered advice to crypto exchanges and cryptocurrency issuers about their preliminary stance on so-called value-referenced crypto assets, with a special consideration for stablecoins. The CSA - the coordinating body for Canada's regional and territorial security regulators - issued a clarification on October 5, stating that it might allow trading in select cryptocurrencies that denote the value of a single fiat currency, subject to specific conditions.
In a reaffirmation of an earlier stance from February, the CSA opines that stablecoins might qualify as securities and/or derivatives, which are forbidden from trading on Canadian crypto exchanges. Conversely, if issuers can maintain a suitable asset reserve with a qualified custodian and crypto exchanges offering stablecoins publicly disclose information related to governance, operations, and asset reserves, such assets might get the CSA's nod for trading.
Stan Magidson, the Chair and CEO of the Alberta Securities Commission and CSA Chair, conveyed in a statement that this transitional structure, designed to be enhanced later, establishes certain standards to ensure investors understand what they're buying, including all associated risks.
Despite this, the CSA emphasized that fiat-backed crypto assets that adhere to the conditions are still marked by risk and shouldn't be perceived as guaranteed or devoid of risk.
Reports from August showed that clear regulatory guidelines in Canada have spurred more institutional interest in crypto. In July of this year, the CSA presented guidance on staking, indicating that it's permitted, but loaning opportunities are minimal, and the percentage of "illiquid" assets is restricted.
The market capitalization for stablecoins has been down in the past year and a half and is presently around $123 billion, accounting for approximately 11% of the total market cap in crypto.
Published At
10/6/2023 6:21:00 AM
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