The Canadian Securities Administrators (CSA) unveiled proposed amendments to regulations governing the treatment of crypto assets by public investment funds on January 18.
In addition to establishing standards for custodianship, the proposed amendments currently under contemplation would restrict the crypto-related activities of public investment funds.
The amendments would restrict crypto assets’ direct purchase, sale, and holding to alternative investment funds and non-redeemable investment funds only. Other mutual funds could only invest in those funds to gain cryptocurrency exposure.
Invested assets must meet the following requirements: they must be fungible and listed on an exchange recognized by a securities regulatory authority in Canada.
Furthermore, it would be mandatory to insure and store assets in refrigerated wallets. It is compulsory to have a public accountant conduct an annual evaluation of the internal administration of the custodian.
The alterations will be integrated into the Companion Policy and National Instrument 81-102 Investment Funds that are associated with it. A national instrument is a regulation or order that has received the official endorsement of every province and territory in Canada.
The codification of securities regulations in national instruments is a common practice, given that the CSA coordinates provincial regulations on securities. As stated by the CSA:
“We think this [greater regulatory clarity] can facilitate new product development in the space while also ensuring that appropriate risk mitigation measures are built directly into the investment fund regulatory framework.”
The amendments are a component of a July-announced initiative. A consultation paper and deliberation on a more comprehensive regulatory framework for cryptocurrencies will ensue after the proposals have been subject to public comment for 90 days.
Spot Bitcoin exchange-traded funds have been available in Canada since 2021.
