Canadian securities regulators have introduced new proposals designed to enhance clarity and risk management for public investment funds involved in crypto assets. The suggested regulatory changes aim to impose restrictions on the activities of public investment funds in the realm of cryptocurrencies, establishing guidelines for the handling of crypto assets.

According to the proposed regulations, only alternative investment funds and non-redeemable investment funds would have the authorization to directly trade or hold crypto assets. For other mutual funds seeking exposure to cryptocurrencies, the avenue would be to invest in the aforementioned authorized funds.

Furthermore, the crypto assets in which funds are invested must be listed on an exchange recognized by a Canadian securities regulatory authority and must be fungible. These assets are also required to be insured and stored in cold wallets, subject to an annual assessment of the custodian’s internal management.

These proposed amendments are part of an ongoing initiative by the Canadian Securities Administrators (CSA) to establish a comprehensive regulatory framework for crypto assets in Canada. The proposals are open for public commentary for a duration of 90 days. Subsequently, a consultation paper will be developed, and a broader regulatory framework for crypto assets will be considered.

It’s worth noting that Canada has had spot Bitcoin exchange-traded funds (ETFs) since 2021, marking a prior foray into the crypto asset investment landscape.