On January 18, the Canadian Securities Administrators (CSA) unveiled suggested modifications to regulations governing the treatment of cryptocurrency assets by public investment funds. The contemplated amendments aim to impose limitations on the actions of public investment funds in the crypto space and set criteria for custodianship standards.
According to the proposed changes, only alternative investment funds and non-redeemable investment funds would be permitted to directly buy, sell, or hold cryptocurrency assets. Other mutual funds would only be allowed to invest in these funds to gain exposure to cryptocurrencies. The chosen assets must be listed on an exchange recognized by a securities regulatory authority in Canada and must be fungible.
Canadian securities regulators seek feedback on rules for public investment funds holding crypto assets. https://t.co/x82uL6XgTG pic.twitter.com/uKGSlCDD8S
— CSA_News (@CSA_News) January 18, 2024
Moreover, the assets should be insured and stored in cold wallets, with an obligatory annual assessment of the custodian’s internal management by a public accountant.
These adjustments are set to be incorporated into National Instrument 81-102 Investment Funds, along with its accompanying Companion Policy. A national instrument is a regulation or order uniformly adopted across all Canadian provinces and territories. Securities regulations are typically codified in national instruments to ensure consistency in the context of securities regulation being provincially managed but coordinated through the CSA. The CSA expressed the view that these modifications would enhance regulatory clarity, fostering new product development in the crypto space while embedding risk mitigation measures directly into the investment fund regulatory framework.
This initiative is part of a project announced in July, with the proposed changes open to public comment for a 90-day period. Following this, a consultation paper will be drafted, and a broader regulatory framework for crypto assets will be considered.
It’s worth noting that Canada has had spot Bitcoin exchange-traded funds since 2021.