The Canadian Securities Administrators (CSA) have announced their intention to make amendments to the current fund regulations. In particular, these changes will add new detailed provisions tailored to crypto funds. These changes are intended to formalize practices that have already been in place via the prospectus review and approval process for crypto funds. The CSA is adopting exemptions previously granted to crypto funds, as regulators have gradually allowed these innovative funds into the investment market. These rule changes are scheduled to take effect on July 16, subject to government approvals. They constitute the second part of a three-part plan by the CSA, intended to develop a full regulatory framework for the crypto market.
These regulatory changes are intended to provide a consistent and straightforward process. This framework will allow the crypto sector, which is growing exponentially, to thrive. The CSA plans to fold these rules into the existing regulatory structure of investment funds. This action is intended to bring greater certainty and protection to investors while fostering responsible innovation in the crypto market.
Codifying Crypto Fund Practices
The upcoming rule changes will officially codify the practices that have been informally applied through the prospectus review process for crypto funds. This change creates a much more transparent and predictable home for fund managers and investors from all walks of life.
Aside from codifying standards that have become universal practices already, the CSA is adopting exemptions granted to crypto funds in the past. By providing formal recognition of widely acknowledged exemptions, this provides certainty and clarity for dollars that have already done their regulatory due diligence.
"will provide investment fund managers with greater regulatory clarity concerning investments in crypto assets," - CSA
Revisions and Public Consultation
After a January 2024 public consultation with stakeholders, the CSA has revised its original proposals addressing many of the issues raised over a number of proposed rule changes. As such, the CSA has decided that these revisions are non-material, waiving the need for an additional round of public consultation. Alteration No. 1 This decision shows the CSA’s prioritization of efficiency and responsiveness to being effective regulators in their decision making.
This comprehensive rule change, published today, is phase two of the project. Phase two is all about incorporating crypto money into the current regulatory architecture.
Future Regulatory Landscape
The adoption of such rules for crypto funds is a big step forward. It moves the ball significantly forward toward the creation of a broader regulatory framework for the flourishing crypto sector, here in Canada. This initiative is just one example of the CSA moving beyond the cookie-cutter approach to proactively tackle the unique challenges and opportunities crypto assets present.
Looking forward, the CSA is preparing for the third and final phase of its regulatory initiative. This stage will involve a public consultation to create a more robust framework for crypto investment funds. This upcoming consultation will provide an opportunity for stakeholders to contribute to the ongoing evolution of crypto regulation in Canada.
