The Canadian Securities Authority (CSA), Canada's chief financial agency, has expressed its confidence in a regulated cryptocurrency futures market that enables better price discovery. The Canadian market is already home to several cryptocurrency exchange-trad ed funds (ETFs) alongside the United States . On July 6, the CSA released guidance to assist fund managers in complying with legal requirements for investment funds that hold crypto assets. The 15-page document defends the existence of Canadian crypto ETFs, highlighting their ability to hedge against price fluc tuations in specific crypto assets.
The CSA specifically mentions Bitcoin and Ethereum as the best-backed public crypto assets, while also setting limits on the proportion of illiquid assets within a fund. It urges investment funds to conduct thoroughly due diligence to determine whether the crypto assets they plan to invest in are securities or derivatives. The guidance also prohibits investment managers from lending non-securities assets. In terms of custody, the document outlines minimum expectations for crypto asset custody, including primary storage in cold wallets, asset segregation, blockchain visibility, corporate crime insurance, and reporting to fund auditors.
The issue of cryptocurrency staking is also addressed in the guidance. The CSA clarifies that it does not explicitly prohibit staking, but fund managers are expected to exercise caution to prevent liquid crypto assets from becoming ill during the staking process and to adhere to illiquidity limits. In recent months, Canada has witnessed some major cryptocurrency exchanges suspending their operations due to regulatory concerns. In April, decentralized exchange dYdX announced its withdrawal from serving Canadian users, followed by Binance and Bybit voluntarily exiting the country in May.
