The Canadian Securities Administrators (CSA) is providing further guidance to crypto asset trading platforms based on its interim approach to the trading of value-referenced crypto assets or VCRAs (commonly referred to as stablecoins) as laid out in in CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients (The Staff Notice).

In February 2023, the CSA confirmed its view that VCRAs, (commonly referred to as stablecoins) designed and promoted to maintain a stable value over time in relation to a reference asset, may constitute securities or derivatives. While Canadian law prohibits crypto asset trading platforms operating in Canada from trading crypto assets that are securities or derivatives, the regulator understands that stablecoins may have a use for the Canadian clients of crypto asset trading platforms. 

The CSA has indicated that it may allow, subject to terms and conditions, the continued trading of certain stablecoins that reference a given fiat currency. The regulator’s most recent notice sets out interim terms and conditions that would apply to crypto asset trading platforms and the issuers of fiat-backed crypto assets if they wish to continue allowing Canadian clients to purchase or deposit these assets.

The interim terms and conditions were informed in part by comments from Canadian crypto market participants, as well as developing international standards and regulations. They are intended to address investor protection concerns presented by VCRAs and include, among other things, the following provisions:

  • The stablecoin issuer must maintain an appropriate reserve of assets with a qualified custodian, held for the benefit of the crypto asset holder;
  • The stablecoin issuer and crypto asset trading platforms that offer them must make certain information related to governance, operations/ and reserve of assets available to the public.

The CSA cautions investors that stablecoins, including those referencing fiat currencies and satisfying the interim terms and conditions, are subject to various risks and are not the same as fiat currency. The regulator also cautions that because an asset may satisfy its interim terms and conditions, it does not mean the asset is risk-free or somehow endorsed or approved by the organization.

The regulator welcomes submissions regarding the appropriate long-term regulation of stablecoins, such as alternative criteria for trading other types of VCRAs. Crypto asset trading platforms and VCRA issuers should contact their Principal Regulator with any questions or to discuss further.

The complete list of terms and conditions, as well as instructions for crypto asset trading platforms that wish to continue allowing clients to buy or deposit VCRAs is available in CSA Staff Notice 21-333, Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients, which is available for download from CSA members’ websites.

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.