The Canada Securities Administrators (CSA) recently issued fresh rules for investment funds that hold or intend to make investments in crypto assets.
Canada Securities Administrators (CSA) introduced new rules for investment funds that hold or want to engage in crypto assets, focusing on compliance with securities law requirements. Unlike the US SEC, Canada acknowledges the benefits of Bitcoin and cryptocurrencies and is gradually reducing the restrictions on investment in crypto assets. Major crypto events, such as the 2023 Blockchain Futurist Conference and ETHToronto, will take place in the following months.
A non-redeemable investment fund with assets exclusively invested in Bitcoin (BTC) was formed as a result of the Canadian public crypto asset fund that was launched in April 2020. There were 22 public crypto asset funds in Canada as of April 30, 2023, and their combined net assets were worth CAD $2.86 billion.
Canada Issues Guidance on Crypto Asset Investment Funds
The Canadian Securities Administrators (CSA) released guidance regarding the current securities regulatory requirements for crypto asset investment funds. Aside from Bitcoin (BTC) and Ethereum (ETH), the CSA additionally addressed its views and expectations with regard to crypto staking, crypto custodians, and investment in other crypto assets.
In accordance with the CSA, fund managers require to discover an active market for the crypto asset, the presence of a regulated futures market for that crypto asset, and available indices for the crypto asset that are provided by a regulated index provider. It needs to have a sizable trading volume.
In order to obtain a spot price for a crypto asset, the CSA advised using publicly available indices that aggregate prices from many sources, claiming that doing so “will help mitigate the risks of inaccurate pricing of a particular asset.”
“Alternative mutual funds” are defined as funds that have been classified as ETFs or traditional mutual funds. Since their respective releases in Canada, these products have not encountered any considerable difficulties with satisfying redemption requests.
Funds which are interested in including staking crypto assets can only do so on top networks and for blockchains that are particularly intended as proof-of-stake (PoS) blockchains. To stake the fund’s crypto assets, one must be familiar with staking crypto assets and writing agreements with numerous third parties.
Assets related to cryptocurrencies must be held securely by IFMs and custodians. The crypto assets funds must be stored in a cold or offline wallet that is separated from the custodian’s and the custodian’s other customers’ assets, comes with the appropriate insurance and is subject to annual reporting.
As the bull market prices in before halving, institutional and retail investors are depositing money into crypto asset funds. Prices for Bitcoin and Ethereum are rising as a result of the strong investor demand.