USDC Stablecoin Issuer Circle Files Undertaking with CSA – McCarthy Tétrault
On December 3, 2024, Circle Internet Financial, LLC (Circle) made history by being the first stablecoin issuer to file an undertaking with the Canadian Securities Administrators (CSA). This undertaking, known as the Circle Undertaking, paves the way for crypto asset trading platforms registered as dealers with the CSA (Registered CTPs) to continue offering USDC in 2025. USDC, the world’s second-largest US-dollar backed stablecoin by market capitalization, is issued by Circle.
The Circle Undertaking brings with it a significant change for Canadian clients. Registered CTPs will no longer be bound by the retail purchase limit of C$30,000 per year when selling USDC to Canadian clients. This limit previously applied to all crypto assets other than Bitcoin, Ether, Litecoin, and Bitcoin Cash in most CSA jurisdictions.
The CSA’s decision to regulate stablecoins, which they refer to as “Value-Referenced Crypto Assets” or “VRCAs”, was announced in October 2023. Despite delays in implementing the regime due to industry concerns, the CSA remains committed to providing a regulatory framework for stablecoins. It’s worth noting that unlike traditional securities, holders of USDC do not expect to profit from holding the stablecoin, as its value is designed to remain stable at 1 USD. Circle’s terms of service also state that holders are not entitled to any interest or returns on the reserve assets backing USDC.
While the Circle Undertaking is a positive step forward in maintaining access to USDC for Registered CTP clients, there are still unresolved issues regarding the regulation of stablecoins in Canada. Interestingly, while Payment Service Providers will soon be prudentially regulated, stablecoin issuers like Circle will not face the same regulatory measures.
Stablecoins like USDC serve primarily as a means of payment, either as a store of value or a medium of exchange. Major players like VISA and PayPal have already entered the stablecoin space, with VISA enabling USDC settlements for card issuers and merchant acquirers, and PayPal offering its own US dollar-backed stablecoin, PYUSD, for transactions on public blockchain networks.
As the regulatory landscape continues to evolve, it’s clear that stablecoins are here to stay, shaping the future of digital payments and transactions.
