In a new notice released on March 29, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) explored how existing regulation can be “tailored” to crypto innovation, including interim approaches for crypto markets and brokers.
The notice is the result of collaboration between the CSA, the Board of Provincial Securities Regulators and IIROC, a self-regulatory organization that oversees investment dealers. The two first released a consultation paper proposing a framework for crypto platforms in 2019. It received 52 letters of comment at the time.
Canada recently approved a wave of bitcoin exchange-traded funds (ETFs), and although bitcoin is not considered a security under the framework, the CSA have recognized that growing interest in bitcoin has led to the adoption of a variety of digital assets.
The CSA did not comment in time for the release on whether the rise of the Canadian bitcoin ETF has affected the release of these guidelines.
A commitment to flexibility
As part of the new focus, regulators have shown their commitment to flexibility with investor protection by including interim approaches for brokerage and market platforms. In both cases, the sites would ask to be registered in a “restricted” form, provided that they do not offer leverage or margin. In either case, the interim approach would be time-limited in the hope that the venue intends to move to a long-term solution.
If market platforms perform exchange functions, they could not benefit from the interim approach. Instead, the relevant securities regulators would consider “whether recognition as an exchange or as an exemption is necessary
in the meantime. ”
It is not yet clear how the CSA will handle the clearing and settlement processes, but the agency said it plans to impose certain terms and conditions on registrants.
“In order to provide flexibility in these cases, we will examine the specific risks presented by the clearing functions to determine whether a [crypto asset trading platforms] will have to be recognized as a clearing agency or exempt from the obligation to be recognized and what terms and conditions should apply, ”explains the opinion.
The same rules apply
Although the guidelines demonstrate a commitment to fostering innovation, they remind sites that they are still accountable to existing regulations. It provides a framework for managing digital asset risk, including standards for transparency, price discovery, insurance and custody. Any interim measures would only be applicable if the risks and requirements are properly addressed, according to the CSA.
The guidance did not mention how over-the-counter should interpret the notice, but the CSA said it planned to provide more clarity for these places.
“Going forward, the CSA plan to review the regulatory framework that applies to brokers and markets that trade over-the-counter derivatives more generally.
Crypto in the room
He also seeks to give crypto a place at the table by including certain “new companies” as members of IIROC.
“IIROC recognizes the need to be flexible and foster innovation and has therefore established a membership path for companies or entities with new business models, including marketplaces or brokers that do not match. not necessarily to the current membership structure of IIROC, ”he said.
He acknowledged that he needed a different review process for crypto and expects so-called “new business models” to get buy-in with conditions and exemptions so they can set up their business models. This differs from the way he currently admits dealerships.