Canada Makes Proposal to Amend Fund Requirements for Crypto

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On January 18, the Canadian Securities Administrators (CSA) proposed new regulations for public investment funds regarding the treatment of crypto assets.

The proposed changes aim to limit the activities of public investment funds with regards to cryptocurrency and establish guidelines for the safekeeping of these assets.

If the amendments are approved, only alternative investment funds and non-redeemable investment funds would be allowed to directly buy, sell, or hold crypto assets. All other mutual funds would only be able to invest in these designated funds to gain exposure to the crypto market.

Additionally, the crypto assets invested in must be listed on an exchange recognized by a Canadian securities regulatory authority and must be easily exchangeable for other assets. To further safeguard these crypto assets, they must be kept in cold wallets and be insured.

Public accountants will also be required to conduct annual reviews of the custodian’s internal management. These new regulations will be incorporated into the National Instrument 81-102 Investment Funds and its accompanying Companion Policy.

National instruments are regulations or orders that are adopted by all Canadian provinces and territories.

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