Modifying Rules For Buying And Selling Of Crypto Assets
The Canadian Securities Administrators (CSA) published several proposed amendments to modify existing laws regulating cryptocurrency asset treatment within public investment funds.
The proposed amendments were made to revise the legislation to align with the changing financial landscape. Both the establishment of stringent custody requirements and the imposition of limits regarding public investment funds for crypto assets are the primary objectives the amendments suggest.
The proposed revisions state that alternative and non-redeemable investment funds can purchase, sell, or hold crypto assets directly. Regarding other funds, their connection with crypto assets would be limited to investing in the funds listed above to acquire cryptocurrency exposure.
Additionally, the crypto assets in which funds are invested must be listed on an exchange formally recognized by a securities regulatory authority in Canada. According to the CSA, this guarantees that the characteristics of the assets follow the standards established for regulatory compliance. The proposal also indicated that the crypto assets must also be fungible.
Furthermore, the proposal recommends that all assets be insured and stored in cold wallets to ensure their safekeeping. Thus, a competent public accountant would conduct an annual review of the custodian’s internal management, providing additional monitoring.
These changes will likely be adopted into National Instrument 81-102 Investment Funds and its accompanying Companion Policy. In the context of provincial and territorial legislation in Canada, the phrase “national instrument” refers to a regulation or order that has been implemented uniformly across all provinces and territories.
This strategy is especially relevant for securities regulation, typically defined through national instruments. In addition, securities are subject to the jurisdiction of different provinces, with coordination facilitated by the CSA.
The CSA emphasizes the potential benefits of these revisions, stating that enhanced regulatory certainty can spur innovation in developing new Bitcoin-based products. Moreover, the actions proposed to ensure adequate risk mitigation procedures are integrated directly into the regulatory framework that regulates investment funds. Hence, this helps create a more stable and secure environment for investors.
Regulator Seeks Public Feedback
It is worth noting that the move was part of a detailed recommendation that started in July, marking a significant development for the Canadian crypto space. Meanwhile, the securities watchdog has launched a 90-day comment period to solicit opinions on these suggestions.
After completing this interaction phase, the next stages would include developing a consultation paper and deliberating on a more comprehensive regulatory framework specific to crypto assets. Notably, Canada has been at the forefront of embracing spot Bitcoin ETFs since 2021, demonstrating the country’s proactive approach to innovative financial instruments.
The country’s strategic step is committed to building a vibrant and active crypto asset ecosystem. More importantly, the proposed revisions are consistent with Canada’s ongoing efforts to modify its crypto regulatory approach, emphasizing inclusivity and responsiveness to the dynamic digital asset ecosystem.
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