Outlines criteria regarding the types of crypto assets that public crypto asset funds are permitted to purchase or hold, as well as restrictions on investing in crypto assets.
Requirements re custody of crypto assets held on behalf of a public crypto asset fund.
Codifies exemptive relief previously granted to existing public crypto asset funds.
Facilitates new product development while also ensuring that appropriate risk mitigation measures are built directly into the investment fund regulatory framework.
Final amendments will come into force on Jul. 16, 2025.
Tailor rules for funds investing in crypto assets to better protect investors, reduce risk.
Requirements included crypto asset investment restrictions and custodial obligations.
Second phase of a project to implement a regulatory framework for public investment fund holding crypto assets; follows CSA first phase providing guidance, see #178716.
Proposal Overview
Aims to provide greater clarity on certain key operation matters for these investments.
Criteria on types of crypto assets public crypto asset funds can purchase, use, or hold.
Restrictions crypto asset investing by public crypto asset funds, or reporting issuers.
Requirements on custody of crypto assets held on behalf of a public crypto asset fund.
Seconds phase seeks to codify policies, practices of existing public crypto asset funds.
Many developed, adopted via prospectus review process, cited in phase 1 Staff notice.
Phase 1 was completed with the publication of CSA Staff Notice 81-336, entitled Guidance on crypto asset investment funds that are reporting issuers, on July 6, 2023.
Also, where appropriate, seek to codify routinely granted exemptive relief for products.
Third phase expected to include a public consultation on a broader framework.
Proposed Restrictions
Proposed to amend investment restrictions in S. 2.3 to permit only alternative mutual funds, non-redeemable investment funds to buy, sell, hold/use crypto assets directly.
Would apply to investing indirectly in crypto assets through specified derivatives.
Under proposal, other mutual funds could only invest in crypto assets by investing in underlying alternative mutual funds/ non-redeemable funds that invest in crypto asset.
Limited crypto asset types alternative mutual funds, non-redeemable funds can invest.
Restricted funds subject to NI 81-102 to invest only in crypto assets listed for trading on/are underlying interest for a specified derivative, traded on recognized exchange.
Prohibited public crypto asset fund from buying/holding non-fungible crypto assets.
Banned use of crypto assets in securities lending, repurchase transactions or reverse transactions, as loaned/transferred securities/collateral posted for these transactions.
Custody Provisions
Included proposed provisions specifically applicable to custodians and sub-custodians that hold crypto assets on behalf of an investment fund (a crypto custodian).
Requirement for crypto custodian to keep crypto assets in offline "cold wallet" storage.
Except as needed to facilitate purchases, sales or other portfolio transactions in fund.
Obligation for a crypto custodian to maintain insurance regarding crypto assets it custodies for an investment fund that a reasonably prudent person would maintain.
No proposed specific type of insurance/minimum dollar amount to meet this standard.
New section on custody standard of care would be added under NI 81-102CP, to set out a reasonably prudent standard for insurance, assessed per fiduciary obligations.
Reporting Obligation
Must annually obtain a report prepared by a public accountant assessing the crypto custodian's internal management and controls relating to security and availability.
Additionally, the custodian's processing integrity, confidentiality and privacy controls.
Report would be required to be delivered to the fund, confirm it it provided the report.
SOC-2 Type 2 report contemplated for purposes of complying with these obligations.
Exemptive Relief
Proposed to codify exemptive relief granted to existing public crypto asset funds to permit them to accept crypto assets as subscription proceeds under subsection 9.4(2).
Exemptive relief addressed a technical issue in the existing provision which only allows a mutual fund to accept securities as subscription proceeds in lieu of cash.
Clarified mutual fund can accept crypto assets not securities as subscription proceeds.
Permitted under similar, listed conditions, to permit future public crypto asset fund ETFS to facilitate similar market functions without the need for exemptive relief.
Other Amendments
Amended alternative mutual fund to include mutual fund that invests in crypto assets.
Clarify that a money market fund as defined in S. 2.18 cannot buy/hold crypto assets.
NI 81-102 CP Amendments
Amended NI 81-102CP, to add sections with guidance on crypto assets investing.
New section on custody standard of care, to expand guidance for meeting the standard of care requirement set out in section 6.6 of NI 81-102in context of crypto custodian.
Would clarify CSA’s expectations on the proposed requirement in subsection 6.6(3.1) for crypto custodians to obtain insurance with respect to crypto assets in its custody.
New section addressing requirement crypto custodian obtain an assurance report of its processes relating to security and other measures pertaining to its custody obligations.
On Apr. 17, 2024, CAN IIAC issued response letter to CSA OSC proposed amendments.
Limits on the crypto assets that Public Crypto Asset Funds can invest are restrictive.
Statement made in Companion policy as to what is generally considered to be a crypto asset is much broader than definition of crypto assets used by CSA in context of CTPs.
CSA OSC does not address matters such as staking, value-referenced crypto assets.
Requests CSA OSC to provide commentary on whether public crypto asset funds may be permitted to engage in staking, to invest in and hold value-referenced crypto assets
May 2024 CSA Que Comments
On May 15, 2024, CSA Que published comments received from NI 81-102 proposal.
Apr. 2025 CSA NI Adoption
On Apr. 17, 2025, CSA issued notice of adoption of amendments to NI 81-102 and CP.
Outlines criteria regarding the types of crypto assets that public crypto asset funds are permitted to purchase or hold, as well as restrictions on investing in crypto assets.
Requirements re custody of crypto assets held on behalf of a public crypto asset fund.
Codifies exemptive relief previously granted to existing public crypto asset funds.
Facilitates new product development while also ensuring that appropriate risk mitigation measures are built directly into the investment fund regulatory framework.
Final amendments will come into force on Jul. 16, 2025.
Regulators
CAN IIAC; CAN NBW PRL; CSA; CSA ALB; CSA BC; CSA MSC; CSA NVS; CSA OSC; CSA Que
Entity Types
B/D; Fiduciary; IA; Inv Co
Reference
CSA OSC: PR, Bul Vol. 48 No. 15 p. 3617, 4/17/2025; Bul Vol. 47 No. 3 p. 623, PR, RF 2024-2, 1/18/2024; CSA ALB: PR, 1/18/2025; CAN Que: PR, 4/17/2025; Rsp, 5/15/2024; PR, 1/18/2024; CSA BC: PR 2025/021, 4/17/2025; PR 2024/004, 1/18/2024; Nt 81-336, 7/6/2023; CAN IIAC: PR, Lt, 4/17/2024; CAN NBW PRL: PR, 1/18/2024; CSA MSC: PR, RF 2024-2, 1/18/2024; Citation: NI 81-102;
