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Canada proposes changes to investment fund requirements for cryptocurrencies

by SuperiorInvest

On January 18, the Canadian Securities Administrators (CSA) released proposed changes to regulations on how public investment funds treat crypto assets. The proposed amendments under consideration would restrict the activities of public investment funds with respect to cryptocurrencies and establish standards for custody.

Under the amendments, only alternative investment funds and non-refundable investment funds would be able to buy, sell or hold crypto assets directly. Other mutual funds might only invest in those funds to receive exposure to cryptocurrencies. The invested assets would have to be listed on an exchange recognized by a securities regulatory authority in Canada and would have to be fungible.

Additionally, assets would have to be insured and guarded in cold wallets. An annual review of the custodian’s internal management by a public accountant would be required.

Related: Canada May Also Benefit as US Finally Gets Spot BTC ETF: Coinbase Exec

The changes will be incorporated into National Instrument 81-102 Investment Funds and the accompanying Companion Policy. A national instrument is a regulation or order that has been adopted in all Canadian provinces and territories. Securities regulations are typically codified in national instruments, as securities are regulated at the provincial level with coordination through the CSA. According to the CSA:

“We believe that this [greater regulatory clarity] “It can facilitate the development of new products in the space while ensuring that appropriate risk mitigation measures are incorporated directly into the regulatory framework for investment funds.”

The amendments are part of a project that was announced in July. The proposals will be open to comment for 90 days and will follow the drafting of a consultation paper and consideration of a broader regulatory framework for cryptoassets.

Canada has had spot Bitcoin (BTC) exchange-traded funds since 2021.

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