Canadian regulator outlines guide on crypto funds

Canada’s primary financial authority, the Canadian Securities Administrators (CSA) has committed to regulating a futures market in the cryptocurrency industry. This will help crypto exposure for investors who are on the fence about buying cryptocurrency directly

The CSA released guidelines for cryptocurrency fund managers to comply with regulatory legislation requirements. The document, “Crypto Asset Investment Funds that are Reporting Issuers”, is a guide for fund managers to understand the law requirements as well as a report that advocates for the industry. Cryptocurrency exchange-traded funds (ETFs) are defended in the notice:

“The existing Public Crypto Asset Funds that are structured as ETFs or conventional mutual funds are classified as “alternative mutual funds” [and] accordingly have a greater ability to borrow cash or provide a security interest over their assets, engage in short selling or use specified derivatives applicable to alternative mutual funds.”

The notice highlights ETDs are helpful tools to alleviate volatility and price swings of cryptocurrency assets such as Bitcoin ($BTC) and Ether ($ETH). With investors in mind, the CSA outlined the best public digital asset funds support which offers consumer protection. As part of investor protection, the CSA noted the legal expectations for crypto asset custodians, including the primary storage of assets being cold storage, crypto assets being segregated by fund and blockchain, web security measures being sound and secure, and the necessary expertise and experience in crypto funds.

Crypto staking as a feature, the act of committing crypto assets in smart contracts, is also noted in the report. The CSA does not ban staking but maintains that the liquidity of assets is important to keep tabs on in the staking process. Managers must comply with illiquidity restrictions if they offer crypto staking. The CSA staff will continue to monitor the role of crypto staking in the industry to assess the legal processes that might be necessary.

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