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The Canadian Securities Administrators (CSA) have confirmed its confidence in the regulated cryptocurrency futures market, considering that Canada was the first country to launch a bitcoin exchange-traded fund (ETF):
“The presence of a regulated futures market can support the ability of licensed brokers and market makers to properly perform their market making functions with respect to public funds of crypto assets that are ETFs”
The CSA guidance report explained how compliance is streamlined for investment funds dealing with crypto assets. In validating crypto ETFs in Canada, the CSA have suggested that they are adequately equipped to handle the price swings characteristic of cryptocurrencies.
In addition, the CSA have emphasized the importance of maintaining a balance between liquid and “illiquid” assets, that is, those that are not readily marketable. They expect investment funds, after thorough due diligence, to identify whether the crypto assets they plan to invest in qualify as securities or derivatives:
“Depending on how a given crypto asset is characterized (…) may limit an investment fund’s ability to purchase and hold a single crypto asset, as existing public crypto asset funds holding bitcoin currently do. or ether.”
The guidelines also set out key requirements for the custody of crypto assets. Among them are prerequisites for primary storage in cold wallets, segregation of assets and ensuring visibility on the blockchain, the obligation to cover corporate malfeasance, and regular reporting to fund auditors.
It also describes the staking rules. While not entirely frowned upon, the report states that “neither a fund nor its investment fund manager (IFM) should act as its own validator”, and all staking services should be contacted by staking companies as a service in order to stay within limits. regulations.
And, while the US struggles to launch a Spot Bitcoin ETF, the ASC already has plans for when a Canadian spot cryptocurrency ETF should be accepted. He noted in the report, “Selecting publicly available indices that aggregate prices from various sources to determine a spot price (…) will help mitigate the risks of inaccurate pricing of a particular crypto asset.
Canada has spear nine cryptocurrency ETFs, with the Purpose Bitcoin ETF being its first on February 25, 2021.
This guidance comes after the release of major crypto exchanges such as dYdX, Binance And per bit of Canada earlier this year, citing regulatory concerns. The CSA’s comprehensive guidelines could now provide a roadmap for crypto market operations in Canada, ensuring investor protection while improving how fintech and crypto could work in tandem.
