“We encourage interested parties to review this guidance to better understand our expectations of public crypto asset funding. It is important that such funds clearly understand their existing regulatory obligations given recent events in the crypto market."
The Canadian Securities Administrators (CSA), which coordinates and harmonizes the regulation of Canadian capital markets, has published guidance to help fund managers understand and comply with securities law requirements for public investment funds holding crypto assets.
The Council of Canadian Provincial and Territory Securities Regulators is making clear its expectations for public crypto asset funds.
"Understand our expectations of public crypto asset funds"
The new CSA guidance, which provides an overview of public crypto asset funds operating in Canada and outlines related oversight initiatives by CSA members, also covers.
- Characteristics of the crypto-asset market that could affect their viability as investments for public crypto-asset funds
- Expectations Regarding Custody of Crypto Assets Held on Behalf of a Fund
- Issues related to return generating activities, such as staking, by public funds of crypto assets
- Know your customer, know your product and eligibility obligations regarding public crypto asset funds.
Stan Magidson, Chairman of the CSA and Chairman and CEO of the Alberta Securities Commission, said: “We encourage interested parties to review this guidance to better understand our expectations of public crypto asset funding. It is important that such funds clearly understand their existing regulatory obligations given recent events in the crypto market."
Investing in crypto assets, even through public investment funds, is riskier and may not be suitable for most retail investors, the CSA warned, as investing in crypto assets is generally a speculative activity, and the value and liquidity of crypto assets are highly volatile.
Regulatory oversight of public investment funds is important for investor protection, but it cannot eliminate all risks associated with investing in crypto assets, the CSA noted.
Binance, Bybit Leave Canada Amid Tighter Crypto Rules
Meanwhile, tougher new rules for crypto service providers in Canada are prompting some of the biggest names within the space to leave the jurisdiction, namely Binance and bybit.
Canada's financial regulator is implementing a coordinated supervisory regime for cryptocurrency activities. Now, all crypto trading platforms seeking to register are required to sign pledges to comply with investor protections. The new rules will also make it more difficult for retail investors to trade cryptocurrencies using leveraged betting.
The Canadian Securities Administrators (CSA) plan to strengthen their oversight of cryptocurrency exchanges operating in the country. As part of a basket of new registration requirements, cryptocurrency applicants will have to agree to stricter rules, including a ban on margin and leverage trading.
Additionally, the proposal prevents cryptocurrency providers from accepting credit card payments and requires them to keep customer assets separate from their own operating funds.
These measures also include suggestions that providers should be required to hold all Canadian customer assets "with appropriate custodian and segregate these assets from the business that owns the platform."
In order to continue trading while your application is being processed, cryptocurrency platforms must give their primary regulator a prior registration commitment. By making these commitments, the cryptocurrency exchange acknowledges that its platform is subject to terms and conditions that address investor protection issues.
