Exchanges Can Now Trade Stablecoins in Canada on this Condition

The Canadian financial regulator, the Canadian Securities Administrators (CSA) has announced new guidance concerning the trading of stablecoins by crypto exchanges.

The agency announced under its interim approach to the trading of stablecoins, that exchanges can trade stablecoins if they strictly adhere to prescribed terms and conditions. 

CSA announced in February this year that value-referenced crypto assets (stablecoins) “may constitute securities and/or derivatives” since they drive value from other assets. However, the financial watchdog also acknowledged the critical role that stablecoins play in Canadian markets, hence the permission for their trading.

“While crypto asset trading platforms operating in Canada are prohibited from trading crypto assets that are securities and/or derivatives, the CSA understands that value-referenced crypto assets may have certain uses for the Canadian clients of crypto asset trading platforms,” a press release.

“Accordingly, the CSA indicated that it may allow, subject to terms and conditions, the continued trading of certain value-referenced crypto assets that are referenced to the value of a single fiat currency (fiat-backed crypto assets),” it further stated.

The CSA released a notice which served to inform crypto trading platforms and issuers of stablecoins of the interim terms and conditions they must meet for Canadians to continue trading or depositing such assets.

“The interim terms and conditions were informed in part by comments from Canadian crypto market participants, as well as developing international standards and regulations,” the CSA said. “They are intended to address investor protection concerns presented by value-referenced crypto assets.”

The Interim Terms and Conditions

Among the terms and conditions spelt out by the CSA are that the issuer of a stablecoin “must maintain an appropriate reserve of assets with a qualified custodian, held for the benefit of the crypto asset holder,” and both the issuer and crypto asset trading platform that offers access to the stablecoin “must make certain information related to governance, operations, and reserve of assets publicly available.”

Commenting on the terms, Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission said:

“The transparency of value-referenced crypto assets about the composition and adequacy of their reserves and their governance are critical issues that must be addressed to protect Canadian investors and the integrity of our capital markets.” 

“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,” he added.

These conditions are coming as a result of rising concerns around stablecoins. Concerns started building up when the algorithmic TerraUSD stablecoin depegged and went spiraling to the ground last year. The CEO, Do Kwon is still facing legal challenges because of the incident, but regulators have become wary of stablecoins as a result.

Canada’s Crypto Regulation

Canada is one of the countries that have taken crypto regulation a little to the extreme, almost like the United States. Because of its regulatory demands, crypto exchange Binance had to withdraw its services from the country.

Another top crypto exchange Kraken has also faced serious regulatory challenges, but has held on and made some changes to continue operating in the country. With such regulatory tendencies, it isn’t hard to see why the CSA is setting strict rules for crypto exchanges to follow in trading stablecoins.

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