- Canada’s securities regulator has released a new set of guidelines to help fund managers understand and comply with securities law requirements for public investment funds holding crypto assets.
The first prospectus for a Canadian public crypto asset fund was issued on April 1, 2020, and resulted in the creation of a non-redeemable investment fund that invests its assets directly in Bitcoin . Following the creation of this fund, several other public crypto asset funds have been launched, including the first exchange-traded funds in the world that invested directly in Bitcoin and Ether.
To make this determination, the CSA said fund managers need to find “sufficient evidence of an active market for the crypto asset comprising actual and regularly occurring market transactions on an arm's length basis; the presence of a regulated futures market for that crypto asset; and publicly available indices administered by a regulated index provider for the crypto asset.”
IFMs are expected to regularly measure, monitor and manage the liquidity of the investment fund's underlying portfolio assets. The CSA said that public funds must have “effective liquidity risk management programs that include the use of stress testing and ongoing monitoring of underlying crypto asset market liquidity and encourage regular review of such programs.”
The CSA found that most ETFs traded “very closely” to their net asset value , and funds structured as ETFs were able to meet large redemption requests without the need to borrow additional funds.For funds that wish to include staking crypto asses, they can only do so for blockchains designed specifically as proof-of-stake , and only on networks where “the staked crypto assets that are used to guarantee the legitimacy of new transactions the validator adds to the blockchain.