Canadian securities regulators are introducing new rules to enhance clarity and risk management for public investment funds involved in cryptocurrencies. These rules aim to set clear boundaries and standards for such funds’ dealings with crypto assets.
Restricting Crypto Trade to Specific Funds
Under these new regulations, only alternative and non-redeemable investment funds will have the permission to directly trade or hold crypto assets in custody. Mutual funds seeking exposure to cryptocurrencies would need to invest in these specific funds, thereby limiting direct crypto interactions to a more controlled group of investment funds.
Stringent Standards for Crypto Asset Holdings
The proposed changes also bring stringent criteria for the crypto assets these funds can invest in. These criteria include:
- The necessity for the assets to be listed on an exchange recognized by a Canadian securities regulatory authority.
- Ensuring the assets are fungible.
- Mandating insurance coverage for the assets.
- Requiring the assets to be stored in cold wallets.
- Annual reviews of the custodian’s internal management systems to guarantee security and compliance.
Towards a Comprehensive Crypto Regulatory Framework
This initiative is part of the Canadian Securities Administrators’ (CSA) broader effort to develop an all-encompassing regulatory framework for crypto assets in Canada. Since the introduction of spot Bitcoin exchange-traded funds (ETFs) in 2021, Canada has been progressively establishing its stance on crypto regulations.
The proposed amendments are currently open for public commentary for a period of 90 days. This phase will be followed by the creation of a consultation paper, which will play a pivotal role in shaping the broader framework for crypto asset regulation in Canada.
