The Canadian Securities Administrators (CSA) has posted a note on value-referenced crypto assets (VRCAs) – otherwise known as stablecoins. While stablecoins are primarily associated with fiat currency, they can also be tied to other assets.
CSA states that registered crypto asset trading platforms (CTPs), as well as firms that have provided a pre-registration undertaking (PRU), to be aware of CTPs and PRUs about the application of terms and conditions related to VRCAs.
The CSA states that while other jurisdictions may be “developing payment-based, banking-based or hybrid regulatory regimes for certain types of VRCAs, the CSA is not aware of any such regulated VRCAs being traded in Canada.”
Nor is the CSA aware of any initiatives to develop similar regulatory regimes in Canada that would address a VRCA issuer’s financial condition, conduct and public disclosure. As a result, we continue to have investor protection concerns with the trading of these investment products in Canada.
All that being said, regulators indicate a willingness to allow for the continued trading of stablecoins that are referenced to the value of a single fiat currency (fiat-backed crypto assets, or FBCAs).
A Staff Notice, published in 2023, outlined the conditions under which stablecoins would be allowed to trade on crypto exchanges.
There was a deadline of April 30, 2024 by which the CSA expected that CTPs would no longer allow clients to buy, deposit, or enter into crypto contracts to buy or deposit FBCAs that do not comply with the terms and conditions. This deadline was extended to October 31, 2024 but has now been extended to December 31, 2024.
The CSA says it is in discussion with crypto firms and is open to suggestions regarding investor protection concerns pertaining to stablecoins.
The CSA adds that investors are reminded that holding a VRCA or a crypto contract with a CTP does not offer the protections generally afforded to hold regulated deposits. Investors wishing to hold VRCAs risk losing all of their investment, or of having to sell at a loss instead of redeeming directly from the issuer on a 1:1 basis.
