Canadian Regulator Clarifies Guidelines For Stablecoins Trading

On October 5, the Canadian Securities Administrators (CSA) issued guidance to crypto asset trading platforms on its interim approach to the trading of value-referenced crypto assets (stablecoins). The CSA revealed that it may allow continued trading of stablecoins under specific terms and conditions.

In February, the agency announced that stablecoins “may constitute securities and/or derivatives,” which Canadian cryptocurrency exchanges are prohibited from trading. However, the CSA could allow the trading of stablecoins if crypto exchanges make “certain information related to operations, governance, and reserve of assets publicly available” and issuers maintain an adequate reserve of assets with a reliable custodian.

Chair of CSA and Alberta Securities Commission, Stan Magidson, stated:

“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.”

Moreover, Magidson emphasized the need for transparency in value-referenced crypto assets, including their governance and reserves, to maintain Canadian market integrity and protect investors. A comprehensive list of the terms and conditions for crypto platforms that wish to continue allowing clients to deposit or purchase stablecoins is available on the CSA members’ website.

Furthermore, the agency cautioned that stablecoins meeting the interim terms and conditions are not risk-free and differ from traditional currency.

Canada’s Regulatory Landscape For Crypto

Canada maintains that cryptocurrencies categorized as securities or derivatives traded on a crypto platform are subject to securities legislation. The CSA requires registered crypto firms to adhere to obligations such as risk management, disclosure, and conducting fair business practices.

Critics have accused the Canadian government of establishing rules that cryptocurrency exchanges find challenging to comply with. Moreover, OKX, Bybit, and Binance announced their exit from the country this year, citing the regulatory environment. Binance stated that the stringent regulations had made the country’s market unsuitable for conducting business.

Unfortunately, today we are announcing that Binance will be joining other prominent crypto businesses in proactively withdrawing from the Canadian marketplace.

We would like to thank those regulators who worked with us collaboratively to address the needs of Canadian users.…

— Binance (@binance) May 12, 2023

The CSA stated that the updated clarification is in response to feedback received from Canadian crypto market players. The move also aims to establish a framework that aligns with global standards and regulations.