Canada Sets Interim Terms for Platforms Offering Stablecoins

The Canadian Securities Administrators published Staff Notice 21-333 on October 5, 2023, setting interim terms under which registered crypto trading platforms and platforms operating through pre-registration undertakings could continue letting Canadian clients buy or deposit certain fiat-backed crypto assets.

The CSA used the broader term “value-referenced crypto asset,” or VRCA, for crypto assets designed to maintain a stable value by referencing fiat currency or another value or right. It had already said in February 2023 that VRCAs may constitute securities or derivatives in several Canadian jurisdictions. The October 5 notice did not reverse that position. Instead, it described a conditional path for a narrower category backed by a single fiat currency.

A conditional route, not blanket approval

The interim template focused on tokens referencing the Canadian dollar or U.S. dollar one-for-one. A qualifying token had to give a holder who maintained an account with the issuer an on-demand redemption right against the issuer or reserve for the referenced currency, less any publicly disclosed fee, with payment within a disclosed reasonable period.

Reserves could include cash, Canadian or U.S. government debt with no more than 90 days remaining to maturity, qualifying money-market-fund securities, or other assets accepted in writing by the relevant regulators. The reserve had to be measured at fair value at the end of each day, held with a qualified custodian for token holders, separated from issuer and affiliate assets, unencumbered, and worth at least the aggregate nominal value of outstanding tokens at least once daily.

Those conditions were a basis on which the CSA would consent to continued platform activity. They were not an endorsement of any token, a declaration that every stablecoin was compliant, or a comprehensive Canadian stablecoin statute.

Disclosure moved alongside reserve quality

The notice required extensive public information from issuers, including outstanding units, reserve managers and custodians, redemption arrangements, holder rights in insolvency, fees, reserve revenue entitlements, and any suspension or failure of redemptions. It also called for a monthly assurance report within 45 days after month-end, covering the final business day and another day selected randomly by the accountant.

Platforms had disclosure duties of their own. Their crypto-asset statements were to warn that no Canadian securities regulator had endorsed the asset, that a VRCA was riskier than a bank deposit or cash held with the platform, and that neither secondary-market stability nor reserve sufficiency was guaranteed. If a platform used “stablecoin” in Canadian-facing communications, the notice prescribed a corresponding caution about peg and redemption risk.

The institutional point was that the peg label alone would no longer carry the analysis. Continued access depended on custody, reserve composition, redemption rights, accounting evidence, public risk statements and ongoing platform due diligence.

The implementation calendar

Issuers seeking the interim route were expected to provide an undertaking acceptable to the CSA by December 1, 2023. The undertaking included submission to Canadian jurisdiction and appointment of an agent for service.

For registered platforms and those with pre-registration undertakings, the notice expected purchases and deposits of VRCAs outside the qualifying fiat-backed category to stop by December 29, 2023. Purchases and deposits of fiat-backed assets that failed the full conditions were expected to stop by April 30, 2024. These were implementation deadlines announced on October 5, not completed removals on that date.

The CSA also said the approach did not apply to non-fiat-backed VRCAs or to a new VRCA a platform wanted to add after the February notice. Its definition was broad enough to include wrapped tokens, underscoring that “value-referenced” covered structures with risks different from cash-backed dollar tokens.

As of October 5, the framework remained explicitly interim and open to alternative proposals that addressed investor protection. The verified development was therefore a regulatory operating standard for platform access—not proof that reserves had been examined, that any named token qualified, or that Canadian clients had already lost access. No asset-price, volume or market-return claim is made because the official records do not isolate a market reaction to the notice.