The Canadian Securities Administrators (CSA), an umbrella organization of the provincial and territorial securities regulators, has published guidance that aims to improve the quality of disclosures around crypto assets.
The new guidance provides detail on what public companies in the crypto space should be disclosing, as the market for digital assets heats up.
“The crypto asset industry is relatively nascent and notably presents unique accounting issues and auditing challenges,” said Louis Morisset, CSA chair and president and CEO of the Autorité des marchés financiers. “This guidance is meant to support crypto asset reporting issuers in providing the information necessary for investors to make informed investment decisions.”
The notice, issued on Thursday, outlines the expectations CSA members have around disclosing assets in areas that include safeguarding crypto assets, the use of crypto trading platforms, risk factors, material changes and promotional activities. It also provides guidance to crypto asset issuers on navigating certain “complex accounting and disclosure issues.”
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The report is based on initial disclosures filed by crypto asset reporting issuers in 2019 annual reports. The CAS noted that, in Canada, most reporting issuers in the crypto asset industry entered the public markets in 2017 or 2018, making 2019 the year of their first annual filings.
The guidance notes the safeguarding of crypto as one focus area for disclosure reviews and provides details on reports from issuers that have a self-custody system versus third-party custodians.
The CSA’s guidance comes as crypto is becoming increasingly more popular in the mainstream. In Canada, a number of FinTech companies are offering cryptocurrency trading options including Wealthsimple, Coinsquare, and others. On an even larger scale, Mastercard recently announced it has begun preparations to support select cryptocurrencies later this year, following the footsteps of PayPal. Cryptocurrency is also becoming more popular in company balance sheets, something that is directly related to Thursday’s guidance report. Notably, Tesla recently purchased $1.5 billion in Bitcoin and said it would soon start accepting it as payment.
The CSA’s report also provided a snapshot of Canadian crypto assets reporting issuer space. Mining accounted for the most amount of activity by far, followed by blockchain technology and investment equity. Trading platforms accounted for the smallest portion of activity.
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