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  • L Misthos and M Bacina

Canadians Clarify Crypto Stablecoin Issuance and Conversion Compliance

The Canadian Securities Administrators (CSA) has shed light on the regulatory framework concerning stablecoin issuance and trading on Canadian crypto exchanges, sparking a myriad of discussions within the blockchain and legal communities.

The CSA unveiled details concerning its interim approach towards the trading of 'value-referenced crypto assets' , notably those often dubbed as 'stablecoins'. Previously the CSA had said that 'value-referenced crypto assets', which are crafted and promoted to sustain a stable over time relative to a reference asset, might be classified as securities and/or derivatives.

Notwithstanding Canadian exchanges racing to register with the CSA, the exchanges are barred from trading crypto assets that are identified as securities and/or derivatives. The CSA has acknowledges that value-referenced crypto assets may hold certain utilities for Canadian clients and that it might permit continued trading of certain 'value-referenced crypto assets' that are referenced to a single fiat currency, subject to terms.

The interim terms and conditions proposed by the CSA were partly informed by feedback from Canadian crypto market participants as well as evolving international standards and regulations and aim to address investor protection concerns presented by value-referenced crypto assets.

Some of these provisions include requiring issuers to maintain an appropriate reserve of assets with a qualified custodian, held for the benefit of the crypto asset holder, and the obligation for the issuer of the value-referenced crypto asset and crypto asset trading platforms that offer them to make certain information related to governance, operations, and reserve of assets publicly available.

Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission, points out the focus for the CSA is the liquidity reserves of exchanges.

The transparency of value-referenced crypto assets about the composition and adequacy of their reserves and their governance are critical issues that must be addressed to protect Canadian investors and the integrity of our capital markets.

The CSA is welcoming submissions regarding appropriate long-term regulation.

In Australia, the Federal Government has prepared a strategic plan for a future-ready payments system which could include stablecoin development. The Reserve Bank of Australia has also released a report informed by their findings on pilot tests conducted on stablecoins, which may work to grow stablecoin use in Australia. There is no specific guidance from ASIC as yet in Australia on what they consider stablecoins to be or how they should be issued, but several large Australian banks have already issued their own stablecoins to start experimenting, albeit not at a retail level.

As regulations become clearer, stablecoins appear only likely to grow in importance to the intersection of traditional finance, payments, blockchain and crypto-assets.

By Michael Bacina and Luke Misthos


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