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The Canadian Securities Administrators (CSA) confirmed its confidence in the regulated futures market for cryptocurrencies, considering that Canada is the first country to launch a Bitcoin exchange-traded fund (ETF):
“The presence of a regulated futures market will support the ability of authorized dealers and market makers to properly execute their market-making duties in relation to Public Crypto Asset Funds ETFs”
The CSA guidance report explains how compliance is streamlined for investment funds that involve crypto assets. By validating crypto ETFs in Canada, the CSA suggests that they are adequately equipped to handle the price changes inherent in cryptocurrencies.
In addition, the CSA states the importance of maintaining a balance between liquid and “illiquid assets,” those that cannot be readily traded. They expect investment funds, following due diligence, to determine whether the crypto assets they plan to invest in qualify as securities or derivatives:
“It depends on how a given crypto asset is described […] may limit the ability of an investment fund to purchase and hold a crypto asset, as is currently done by existing Public Crypto Asset Funds that hold bitcoin or ether.
The guide also outlines key requirements for crypto asset custody. These include requirements for the main storage of cold wallets, segregation of assets and ensuring visibility on the blockchain, mandated coverage for corporate corruption and regular reporting to fund auditors.
It also lays down the rules for staking. Although not entirely disagreeable, the report states that “neither a fund nor its Investment Fund Manager (IFM) should act as its own validator,” and all staking services should be notified to those Staking-as-a-Service company to stay inside. regulations.
And, while the United States is struggling to launch a Spot Bitcoin ETF, the CSA has plans for when to accept a Canadian spot cryptocurrency ETF. It noted in the report, “Select publicly available indices that combine prices from various sources to determine spot prices. […] helps to reduce the risks of inaccurate pricing of a particular crypto asset.
Canada has launched nine cryptocurrency ETFs, with the Purpose Bitcoin ETF being the first of them on February 25, 2021.
This guidance comes after the exit of prominent crypto exchanges such as dYdX, Binance and Bybit from Canada earlier this year, citing regulatory concerns. The CSA’s comprehensive guidelines can now provide a road map for Canadian crypto market operations, ensuring investor protection while also improving how fintech and crypto can work together.
