Bitcoin, ether markets ‘best support operations,’ for public crypto asset funds: CSA

Canada updated its guidance for investment funds investing in crypto.

The notice outlines Canada’s expectation for funds either directly or indirectly investing in crypto assets. As of April, 22 public crypto asset funds have less than 3 billion Canadian dollars in net assets according to Canada’s Securities Administrators.

CSA does play favorites in the notice, stating that it believes bitcoin and ether markets “best support the operations of Public Crypto Asset Funds at this time without compromising investor protection.” Currently, bitcoin and ether are also “the only crypto assets accepted as investments for Public Crypto Asset Funds.”

“In the future, greater institutional support and mainstream adoption of other crypto assets may result in those crypto assets becoming suitable investments for publicly distributed investment funds,” CSA wrote.

The notice also brings up the possibility of a regulated futures market, which would provide “support for the proper valuation of a Public Crypto Asset Fund that invests in that crypto asset, along with other operational benefits.”

“CSA staff consider that the presence of a regulated futures market for a particular crypto asset promotes greater price discovery, a view that is supported by recent research,” they wrote.

The CSA staff weighed in on crypto staking for public funds as well, stating that “depending on how it is conducted, staking may involve the issuance of a security or derivative.”

“CSA staff would therefore expect Public Crypto Asset Funds interested in staking crypto assets held in their portfolios to have established policies and procedures to assess whether any staking or similar activity involves the issuance of a security and/or derivative,” they continued.

Though any fund that proceeds to include staking should undergo “independent analysis” and consider regulatory and securities authorities “about whether staking conducted in the contemplated manner involves the issuance of a security and/or a derivative.”

The updates come after the collapses of multiple crypto firms — including FTX — sent crypto tumbling. Last November, the Ontario Teachers’ Pension Plan took a USD $95 million loss after FTX collapsed, wiping its stake in the crypto exchange.

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