In a recent move, the Canadian securities regulator has expressed its stance on crypto staking and lending. The regulator issued a set of guidelines governing staking and lending services for the crypto firms to comply.
On Thursday, the Canadian Securities Administrators (CSA), which is the chief financial authority in Canada, confirmed its trust in the regulated futures market for crypto, which “promotes greater price discovery.” Notably, other than the US market, the Canadian market hosts several crypto exchange-traded funds (ETFs).
Reportedly, the CSA published a solid framework to help fund managers comply with law requirements for investment funds involving crypto assets. The 15-page document which was released on Thursday defends the existence of crypto ETFs in Canada and explain that ETFs possess the necessary tools to hedge against the price fluctuations of particular crypto assets.
Further, in the document, the CSA named the markets for Bitcoin and Ethereum as providing the best public crypto asset funds support without jeopardising investor protection.
Sources reveal that the newly issued framework targets illiquid assets as well. It places restrictions on the proportion of “illiquid assets,” i.e., the assets in the funds that couldn’t be swiftly disposed of directly through the open market.
The document mentions that after sincere due diligence, the CSA expects investment funds to determine whether or not the crypto assets they propose or plan to invest in are securities or derivatives. Further, it states a strict reminder for investment managers that they’re forbidden from lending assets that do not classify as securities.
However, the regulator doesn’t stop here and lays out “the minimum expectations” for the custody of crypto assets. Among them the expectations, are primary storage in cold wallets, segregation of assets, visibility on the blockchain, insurance for corporate crime and providing reports to fund auditors.
Additionally, the document mentions another issue which is crypto staking. The regulator explains that it doesn’t explicitly prohibit staking, but it expects funds managers to stay alert to liquid crypto assets becoming illiquid during staking, ensuring they comply with the illiquidity restrictions.
In particular, the CSA has been wary of the crypto sector and had expressed a desire to regulate the sector. Throughout discussions that have taken place regarding the regulation of crypto, the regulator has highlighted the harms calling for increased invigilation.
Simultaneously, several countries are considering the ban on lending and staking services as a measure to ensure investor protection. This week itself, Singapore and Thailand came forward with a ban on crypto lending and staking.