Will USDC be the only stablecoin allowed to be traded on crypto asset trading platforms in Canada?

A value-referenced crypto asset (VRCA, commonly known as a “stablecoin”) is a crypto asset designed to maintain a stable value over time by referencing the value of a fiat currency, such as the US dollar, or any other value or right, or a combination thereof. It can be used as a medium of exchange or as a store of value that is less volatile than other crypto assets.

VRCAs enjoy undeniable success, with a combined market capitalization currently approaching the $USD 200 billion mark. However, the complex structure of those assets and their potential lack of transparency may create risks to investors.

In October 2023, considering those risks to the investing public, the Canadian Securities Administrators (CSA) published the CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients (the Notice). This Notice stated CSA’s approach to regulate VRCAs, as well as its expectation that VRCA issuers wishing to continue trading in Canada would enter into an undertaking making them commit to complying with certain regulatory requirements.

The Notice initially mentioned a deadline of April 30, 2024, by which the CSA expected that crypto asset trading platforms (CTPs) allowed to operate in Canada would no longer permit clients to purchase or deposit VRCAs that did not comply with the terms and conditions outlined in the Notice. That deadline was initially extended until October 31 and, by a press release issued on September 26, has been extended again to December 31, 2024.

For more information about the legal regime applicable to VRCAs in Canada, we invite you to read our recent publication What is happening with stablecoins in Canada?

Circle becoming the first stablecoin issuer to sign an undertaking with the CSA

On December 3 2024, Circle Internet Financial, LLC became the first entity to enter into an undertaking with the Ontario Securities Commission and the other members of the CSA regarding the issuance of USDC, the world’s second largest VRCA by market capitalization. Signing this undertaking will allow CTPs to continue trading USDC after the December 31, 2024, deadline.

New York-based Circle and its related entities have been issued various licences to operate in jurisdictions such as US states, the European Union and Singapore. 

Will other issuers enter into an undertaking before the end of the year?

As the end of the year is approaching, one may wonder if other VRCA issuers are attempting to enter into an undertaking before the deadline. Due to the extensive requirements outlined in the Notice, other VRCA issuers may not be willing or able to adapt their business models and expend the resources needed to comply with the Canadian regime.

Other sizable VRCAs, including Tether (USDT), the largest VRCA by market capitalization, are not offered by CTPs in Canada due to regulatory concerns. 

Canadian investors wishing to trade those stablecoins may turn to other methods, such as decentralized exchanges (DEX) or peer-to-peer transactions. However, those methods of trading may not offer investors the same protection as they would benefit from in the regulated industry.