Canadian Regulators Crack Down on Stablecoin Platforms
The Canadian Securities Administrators (CSA) has recently released a set of new rules that crypto companies must follow in order to stay compliant with the law.
The CSA is specifically targeting stablecoin platforms with these regulations.
Crypto asset trading platforms operating in Canada are now prohibited from allowing their customers to purchase or deposit stablecoins, or other types of “Value Referenced Crypto Assets” (VRCAs), without first obtaining written consent from the CSA. In order to obtain this consent, companies must satisfy a number of due diligence requirements, including ensuring that the stablecoin is fiat-backed.
The regulator stated on Wednesday that it would not provide consent for a VRCA that is not fully backed by an appropriate reserve but rather maintains its value through an algorithm.
Stablecoins are cryptocurrencies that are designed to maintain a relatively stable value, typically in reference to a stable asset like a fiat currency. The CSA, however, prefers to use the term VRCA as some stablecoins have not been stable in the past.
Some more traditional fiat-backed stablecoins, such as USDT, USDC, and BUSD, use fiat-denominated reserves to maintain a stable price. Trading platforms are only allowed to permit the buying and selling of these tokens if they are backed by highly liquid assets like cash and cash equivalents, held by a qualified custodian, and subject to monthly review by independent auditors.
In addition, distributions of these tokens must comply with Canadian securities legislation, as fiat-backed crypto assets are generally considered to be securities.