Canadian Regulators Clarify Stablecoin Rules

Stablecoin trading and issuance requirements have been established by the umbrella group for Canadian securities regulators.

The Canadian Securities Administrators (CSA), with an emphasis on stablecoins, have offered guidelines to exchanges and cryptocurrency issuers on their interim approach to what they refer to as value-referenced crypto assets.

On October 5, the umbrella group of Canada's provincial and territorial securities regulators published a statement in which it stated that subject to certain criteria, it might permit trading of some cryptocurrencies that are pegged to the value of a given fiat currency.

Stablecoins "may constitute securities and/or derivatives," which Canadian crypto exchanges are banned from trading, according to the CSA, which stood up to its position in February.

However, if issuers keep a sufficient reserve of assets with a licensed custodian and stablecoin-offering crypto exchanges make "certain information related to governance, operations, and reserve of assets publicly available," the CSA might permit trading in those assets.

Stan Magidson, CEO of the Alberta Securities Commission and Chair of the CSA, commented on the new legsislation, adding:

“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.”

The CSA issued a warning, stating that even fiat-backed crypto assets that meet the requirements are dangerous and should not be seen as endorsed or risk-free.

According to a Cointelegraph article from August, institutions in Canada were becoming more interested in cryptocurrencies as a result of regulatory certainty.

The CSA’s actions are a step forward from the provided instructions on staking in July, indicating that it was already allowed but that there were few lending opportunities and that the percentage of "illiquid" assets must not exceed a certain level.

Over the past 18 months or so, stablecoin market capitalization has decreased and is now at $123 billion, or around 11% of the global crypto market cap.

Movements around MiCA in Europe

On October 5, the European Union's market watchdog, the European Securities and Markets Authority (ESMA), published a second consultative paper on Markets in Crypto-Assets (MiCA) mandates.

The ESMA asks for stakeholders' opinions on five MiCA topics in the 307-page document, including sustainability indicators for distributed ledgers, disclosures of inside information, technical specifications for white papers, trade transparency measures, and record-keeping for crypto-asset service providers (CASPs).

In terms of post-trade transparency, the ESMA suggests mandating that CASPs publish the date and time of trading and publication, the name of the crypto asset, pricing details, the quantity, the execution location, and the transaction ID.

The ESMA further recommends permitting CASPs to save transaction data in "the format they consider most appropriate," provided they may change it into a certain format upon request from the authorities.

By June 30, 2024, the regulator will submit the draft technical standards to the European Commission along with a final report based on the comments received. But first, in Q1 2024, a third consultation package will be published.

The previous consultation paper from the ESMA was published in July. The national competent authorities (NCAs) of the country where the crypto businesses would be registered would still need to receive notices from them containing extra information, according to the proposal made by the ESMA.