The Canadian Securities Administrators (CSA), which is made up of securities regulators from each of Canada’s ten provinces and three territories, has published a long list of new requirements for crypto companies seeking to remain legally compliant, with stablecoin platforms clearly in the crosshairs.
Customers in Canada will no longer be able to buy or deposit stablecoins or other “Value Referenced Crypto Assets” (VRCAs) on crypto asset trading platforms in the country without the CSA’s prior written consent. Obtaining consent entails meeting the administrators’ stringent due diligence requirements, which include ensuring that the stablecoin is backed by fiat currency.
“For greater certainty, we would not expect to provide consent in respect of a VRCA that is not fully backed by an appropriate reserve but rather maintains its value through an algorithm,” wrote a regulator in a notice.
The CSA requires trading platforms to allow such tokens to be purchased or sold only if their reserves are made up of “highly liquid assets” (cash and cash equivalents) and held with a qualified custodian. They must also be subjected to monthly audits by independent auditors, the results of which must be made public “in a timely manner.”
While the CSA recognizes stablecoin use cases such as payments and volatility hedging, it also views them as riskier than fiat currency. Earlier this month, the Securities and Exchange Commission issued a Wells notice to Paxos, alleging that its BUSD stablecoin is an unregistered security.
Also Read: On the Flipside of Paxos-BUSD controversy: What lies ahead?
