Canadian regulator sets guidelines for stablecoin trading
- The development follows the CSA’s earlier reaffirmation that stablecoins may fall under securities and/or derivatives.
- The CSA has indicated its willingness to potentially permit the continued trading of stablecoins.
In a move aimed at providing clarity and guidance to crypto asset trading platforms, the Canadian Securities Administrators (CSA) has unveiled their interim approach regarding the trading of value-referenced crypto assets, often referred to as “stablecoins.”
This development follows the CSA’s earlier reaffirmation, on 22 February, 2023, that stablecoins, designed to maintain a stable value relative to a reference asset over time, may fall under the category of securities and/or derivatives.
While crypto asset trading platforms in Canada cannot trade assets classified as securities and/or derivatives, the CSA recognizes that certain stablecoins, especially those referencing the value of a single fiat currency (referred to as fiat-backed crypto assets), can have specific utility for Canadian clients.
As such, the CSA has indicated its willingness to potentially permit the continued trading of these value-referenced crypto assets. Naturally, this is subject to specific terms and conditions.
Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission, emphasized the importance of transparency regarding the composition and adequacy of reserves and governance for stablecoins to safeguard Canadian investors and maintain capital market integrity.
He stated that the interim framework, which will evolve over time, establishes standards to ensure investors receive essential information about the assets they are purchasing, along with associated risks.
CSA’s interim approach aims to clarify stablecoin trading
Comments from Canadian crypto market participants and evolving international standards have contributed to the interim terms and conditions. They address investor protection concerns related to stablecoins and include several provisions.
Stablecoin issuers must maintain an appropriate reserve of assets held by a qualified custodian, benefiting crypto asset holders. Issuers and trading platforms offering these assets must publicly disclose information related to governance, operations, and asset reserves.
The CSA has urged caution among Canadian investors. The regulator has emphasized that stablecoins, including those satisfying interim terms and conditions, are not equivalent to fiat currency and carry various risks.
Furthermore, the CSA has expressed its openness to receiving submissions regarding long-term regulation for stablecoins. This includes alternative criteria for trading different types of these assets.