On January 18, the Canadian Securities Administrators (CSA) unveiled proposed revisions to regulations governing how public investment funds manage crypto assets. The contemplated amendments aim to constrain the activities of Public Investment Funds in relation to cryptocurrencies and establish custody standards.
According to the proposed changes, only alternative investment funds and non-redeemable investment funds would be permitted to directly engage in buying, selling, or holding crypto assets. Other mutual funds would be restricted to investing in these funds to gain exposure to cryptocurrencies. The invested assets must be listed on an exchange recognized by Canadian securities regulators and must be fungible.
Furthermore, the assets must be insured and stored in cold wallets, with an annual review of the trustee's internal management by a public accountant mandated. These amendments are set to be incorporated into National Instrument 81-102 Investment Funds and their accompanying supporting policies. A national instrument is a regulation or order adopted by all Canadian provinces and territories. Securities regulations are commonly codified in national instruments, given that securities are regulated at the provincial level and coordinated through CSAs. According to the CSA:
“We believe this [clearer regulation] can facilitate new product development in this area, while also ensuring that appropriate risk mitigation measures are integrated directly into the investment funds regulatory framework.”
The proposed changes are part of a project announced in July. Following a 90-day public comment period, a consultation paper will be issued, and a broader consideration of the regulatory framework for crypto assets will follow.
