The Canadian Securities Administrators (CSA) has published a notice that introduces new regulations for crypto exchanges seeing registration. The new regulatory guidelines refer to investor protection commitments and also mandated the registration of cryptocurrency exchanges.

To be specific, crypto asset trading platforms (CTPs) that conduct activities in Canada must provide a pre-registration commitment with the country's securities regulatory within 30 days and initiate a full registration process. The announcement was included in a press release launch on 22 February 2023, which means that CTPs have until the near-end of March to initiate a pre-registration. CSA officials cited by financemagnates.

com mentioned recent insolvencies involving several crypto asset trading platforms and how they brought to light the risks associated with trading crypto assets. As part of the pre-registration effort, companies should commit to better expectations when it comes to the custody and segregation of client crypto assets, as well as prohibiting the offering of margin or leveraged crypto products. Canadian regulators also forbid exchanges to facilitate the purchase and deposits of stablecoins.

Stablecoins are in focus Stablecoins are cryptocurrencies designed to maintain a relatively steady value, usually in reference to a typically involatile asset such as a fiat currency. Cryptocurrency exchanges need the written consent of the CSA to offer stablecoins since 2022 when the CSA labelled stablecoins as securities and/or derivatives. In order to obtain this consent, companies need to meet the administrators' due diligence requirements, including ensuring that the stablecoin is fiat-backed.

According to decrypt. co, Canadian regulators prefer to use the term VRCA when referring to these cryptocurrencies, as some stablecoins have proven to be volatile in the past. For instance, TerraUSD (UST), formerly the third-largest stablecoin by market cap, completely lost its peg to the dollar due to a series of flaws in its algorithmic peg.

More traditional fiat-backed stablecoins such as BUSD, USDT and USDC use fiat-denominated reserves to offer constant convertibility for their tokens, which helps them retain a stable price. The CSA requires that trading platforms permit these tokens to be sold or bought only if their reserves consist of highly liquid assets such as cash. These reserves should also be held with a qualified custodian and should be subjected to monthly reviews by independent auditors.

The notice from the CSA included a recognition of use cases for stablecoins such as payments and volatility hedging. However, the CSA still considers stablecoins riskier than fiat currency. .