CSA clarifies stance on regulating stablecoins, seeking balance between safety and innovation

The Canadian Securities Administrators (CSA) has soften its stance on stablecoin regulations, as it clarified in a recent statement published by the Ontario Securities Commission (OSC).

The regulators noted that their goal now is to find a balance between promoting innovation and investor protection. To that extent, the CSA decided that it may permit continued trading of stablecoins by adding this subject to its terms and conditions.

Canada changes stance on stablecoins

The CSA Chair, who is also a CEO of the Alberta Securities Commission, Stan Magidson, noted that transparency of value-referenced crypto assets regarding the composition and adequacy of their reserves and governance are critical issues. These issues need to be addressed in order to ensure investor protection, as well as the integrity of capital markets.

“This interim framework, which we will build upon in the future, sets certain standards to help ensure that investors receive the information they need about the assets they are purchasing, including the risks associated with them,” he added.

The CSA’s new stance will undoubtedly be seen as an improvement compared to what the regulator said in February of this year, when it remarked that stablecoins might fall under the category of securities and/or derivatives. Now, however, the regulator seemingly acknowledged the potential utility of these assets among crypto traders.

Furthermore, the CSA also introduced a new set of interim terms and conditions that would guarantee transparency for crypto traders, and safeguard their interests. Among the stated measures is the rule that the issuer of stablecoins is obligated to maintain a reserve of assets. Not only that, but they must do so with a qualified custodian.

Requirements for stablecoin issuers and crypto trading platforms

The country’s financial watchdog also said that stablecoin issuers and crypto trading platforms need to make governance, operational, and asset reserve information available to the public for the sake of transparency.

So far, Canadian laws have maintained that digital currency assets that are classified as derivatives and securities must be traded on crypto exchanges that are in compliance with securities legislation. Should a crypto exchange offer contracts and/or instruments that are considered derivatives based on cryptocurrency assets, the standing laws require such platforms to be regulated as securities.

The new laws even include ICOs. Furthermore, it is worth noting that registered crypto entities are subject to specific requirements regarding disclosure, risk management, as well as their obligation to deal fairly, honestly, and in good faith.