New Canadian Regulations For Crypto Trading Firms Leave Minimal Room For Stablecoins

The Canadian Securities Administrators (CSA) published an official notice on February 22 describing some new commitments it expects from cryptocurrency asset trading platforms (CTPs) looking for registration in Canada.

These CTPs will go into a new version of preregistration undertakings (PRUs), which are legally binding documents. The registered CTPs will get contacted by their principal regulators about compliance with new expectations.

The new commitments represent investor protections in the wake of the spate of CTP insolvencies that happened in 2022, the CSA wrote. These new commitments touch on issues that include the determination of capital, the segregation of assets, leverage, transparency, and others. This notice denoted by far the most space to:

“A prohibition on the part of the CTP in respect of clients buying or depositing Value- Referenced Crypto Assets (commonly referred to as stablecoins) through crypto contracts without the prior written consent of the CSA.”

In that context, the CSA has tightened registration needs for crypto exchanges for the second time, after the disorder that was seen in 2022.

The notice explained:

“CTPs are prohibited from permitting Canadian clients to enter into crypto contracts to buy and sell any crypto asset that is itself a security and/or a derivative. […] Staff are of the view that Fiat-Backed Crypto Assets generally meet the definition of ‘security’ and/or would meet the definition of “derivative” in several jurisdictions.”

The CSA would not anticipate giving consent for other kinds of stablecoins like the algorithmic stablecoins, either.

Nevertheless, exceptions can be made in writing by the CSA. The notice stated:

“We recognize that VRCAs may be […] as an on-ramp to deposit assets with the CTP, for the trading of other crypto assets, as a store of value during times of volatility in the crypto asset markets or to avoid converting their crypto assets into fiat currency, or […] as a means of payment.”

Coinsquare, a CTP registered in Canada, listed USD Coin (USDC) and Dai (DAI) stablecoins among its 40 offerings at the time of publication.

#cryptocurrency #crypto #cryptonews
Canadian Securities Administrators may intend to tighten rules for cryptocurrency exchanges later this month. pic.twitter.com/wSytpVZnFq

— Cryptocurrencies Agency (@alsayedomar1252) February 17, 2023

The CSA is an umbrella organization of Canadian provincial watchdogs. Its February 22 notice was the second update to a document introduced in August 2022.