Canada’s securities regulator [CSA] has drafted plans to modify funds that intend to invest directly or indirectly in crypto assets, commonly called public crypto asset funds. The suggestions, collectively referred to as the Proposed Amendments and CP Changes, are now open for a 90-day comment period. The primary aim of these changes is to enhance regulatory clarity in the burgeoning crypto asset space.
Some key highlights are: To establish clear criteria dictating the types of crypto assets that public crypto asset funds are permitted to purchase, use, or hold. The proposed changes include restrictions on investing in crypto assets by public crypto asset funds and other reporting issuer investment funds. Lastly, it outlines specific requirements for the custody of crypto assets held on behalf of public crypto asset funds.
The rationale behind the move is to offer investment fund managers greater regulatory clarity when navigating crypto asset investments. As stated in the proposal, the move is expected to facilitate new product development within the crypto space while ensuring the integration of appropriate risk mitigation measures into the investment fund regulatory framework.
The 90-day comment period provides industry stakeholders, experts, and the public with an opportunity to contribute feedback and insights.
While some believe Canada’s regulator is tightening the reins on how public investment funds engage with cryptocurrencies, others view this in a positive light, saying a clear distinction is made between alternative investment funds and non-redeemable investment funds, which are the only entities that would be allowed to directly purchase, sell, or hold crypto assets.
Canada’s Proposal: Impact and Future Developments
Moreover, the criteria for crypto investments under the new proposal would become more stringent. Any crypto asset that public funds wish to invest in must be listed on an exchange recognized by Canadian securities regulatory authorities and must possess the quality of being fungible.
Additionally, the revisions require these assets to have insurance coverage and to be stored in cold wallets. What’s more, there is a compulsory yearly assessment of the custodian’s internal management by a public accountant.
Earlier on October 5, the Canadian regulator outlined its strategy for value-referenced crypto assets, placing a specific emphasis on stablecoins.
Market observers believe that these amendments are part of Canada’s larger endeavor to create a comprehensive regulatory framework for crypto assets. Announced in July, this project is a response to the booming interest in cryptocurrencies and the urgent need to protect investors.