Canada relaxes strict stablecoin rules, introduces conditions

Canada’s securities regulators have offered clarity around their provisional strategy for the trading of stablecoins, which they refer to as value-referred cryptoassets.

The Canadian Securities Regulators (CSA), an organization of provincial and territorial regulators across the country, acknowledged the potential utility of stablecoins for Canadian clients on Friday.

In line with this understanding, the CSA announced on Friday that it may permit trading of specific stablecoins tied to the value of a single fiat currency, known as fiat-backed cryptoassets, subject to certain terms and conditions.

The temporary terms and conditions, influenced in part by feedback from participants in the Canadian cryptocurrency market, aim to tackle investor protection issues associated with stablecoins.

These terms stipulate that the stablecoin issuer must uphold an “appropriate reserve of assets” with a qualified custodian, for the benefit of cryptoasset holders. 

Additionally, both the stablecoin issuer and the crypto trading platforms that provide these stablecoins must disclose specific information regarding their governance, operations and asset reserves to the public.

In February, the CSA prohibited cryptoasset trading platforms from facilitating the purchase or deposit of stablecoins without obtaining prior regulatory consent.

Furthermore, it set a 30-day ultimatum for unregistered crypto trading platforms operating within Canada, urging them to either commence registration or cease operations in the country.

Subsequently, in May, crypto exchange Binance announced its decision to exit the Canadian market, citing the country’s stablecoin regulations and limitations on investor activity as reasons behind the move. Other notable exits included Bybit, OKX, Paxos, dYdX and Bittrex.

Blockworks has reached out to Binance for comment on the CSA’s latest move.

Although the CSA’s stance on cryptocurrencies seems to have softened, it did issue a distinct warning.

It stressed that, while trading in certain stablecoins may be allowed to continue, Canadian investors should exercise caution as these investments carry inherent risks and should not be regarded as equivalent to fiat currencies.

“The fact that an asset satisfies these interim terms and conditions should not be viewed as an endorsement or approval of the asset, nor give any indication that the asset is risk-free,” it added.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your morning with the top news and analysis to inform your day in crypto.
• Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
• 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
• Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
• The Drop: For crypto collectors and traders, covering apps, games, memes and more.
• Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.