The Canadian Vairy Standard (CIRO) has just tightened the vice on cryptocurrencies. On February 5, the regulator excluded the Crypto Funds for Reduced Margin Eligibility, invoking their high volatility and liquidity risks.
A regulatory decision with immediate consequences
On February 5, the CIRO updated its list of securities eligible for a reduced margin (LSERM), strictly excluding the Crypto funds until further notice.
This announcement intervenes when Evolve Funds Group Inc. is preparing to launch in Canada the first lever crypto fund, with a modest lever of 1.25 x on Bitcoin and Ether.
Concretely, investors will have to file more guarantees for their positions on these funds, making the lever effect more expensive and increasing the risks of forced liquidation in the event of high volatility.
This new regulation is involved in a particular political context, while Pierre Hairy, favorite for the post of Prime Minister and defender of Bitcoin, advocates a favorable approach to crypto.
The Canadian cryptocurrency sector, already losing investments in 2024, faces an uncertain future. US competition and capital flight to Bitcoin ETF recently approved in the United States accentuate pressure. To date, Crypto ETF are the only category of Canadian ETFs to record massive withdrawals, exceeding $ 1.1 billionaccording to National Bank Financial.
Strict criteria that naturally exclude crypto assets
The CIRO has established rigorous criteria for reduced margin eligibility, in fact excluding the Crypto funds. To be eligible, the securities must in particular present a volatility of prices limited to 25 %, maintain a minimum market value of 2 CAD per share, and have a public floating value greater than 100 million CAD.
This regulatory decision comes in a hectic political context, with the recent resignation of Justin Trudeau and the possible coming to the power of Pierre Hairyvre, a candidate openly favorable to bitcoin.
This political transition could influence the future of Crypto regulations in Canada, while the country seeks to balance financial innovation and investor protection.
In short, investors and fund managers will now have to adapt to this new stricter regulatory framework, which could redefine the crypto investment landscape in Canada.
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