We recently participated in an important consultation regarding the inclusion of crypto-backed assets as qualified investments for registered savings plans. As a leading non-profit trade association, CW3 is dedicated to fostering constructive dialogue with policymakers to position Canada at the forefront of Web3 technology. This summary outlines CW3’s key points and recommendations from the consultation, emphasizing the importance of maintaining crypto-backed assets as qualified investments for Canadians’ registered savings plans. You can see the full submission here.
The Case for Crypto-Backed Assets
Crypto-backed assets, which are currently offered by regulated market participants, allow Canadians to gain exposure to the burgeoning digital asset class through familiar investment vehicles. CW3’s stance is clear: crypto-backed assets should continue to qualify as investments for registered savings plans. This perspective is rooted in several core principles:
- Empowerment of Canadian Investors: Canadians should have the autonomy to make informed investment decisions, including the choice to invest in crypto-backed assets. This principle supports the broader goals of wealth accumulation and financial independence.
- Accessibility and Innovation: All Canadians, whether investing through self-directed channels or with the assistance of advisors, should have access to a diverse range of investment options, including crypto-backed assets.
- Policy Clarity and Consistency: Policies regarding qualified investments must be clear, easily understood, and consistently applied to facilitate compliance and minimize administrative burdens on stakeholders.
Current Landscape and Recommendations
Crypto-backed assets fall under three existing categories of qualified investments:
- Crypto-Asset Exchange Traded Funds (ETFs): These are listed securities, providing a straightforward means for Canadians to invest in the crypto asset class.
- Non-Redeemable Investment Funds and Mutual Funds: Investment funds that invest in unbacked crypto-assets should be recognized as qualified investments.
- Exchange Traded Options on Crypto-Assets: These listed financial instruments should also be considered qualified investments, particularly when settled with fiat-backed stablecoins (FBSCs).
Adapting to Market Dynamics and Supporting Innovation
Despite Canada’s early leadership in crypto-asset product development, recent data indicates a shift in market dominance towards the United States. U.S. crypto ETFs have seen significant net inflows, while Canadian ETFs have experienced net outflows in 2024. Interest in tokenization of real world assets by traditional financial firms is growing. These trends underscore the need for supportive policies that maintain Canada’s competitive edge in the global market.
Future Considerations and Policy Suggestions
CW3 makes the following suggestions to further support the inclusion of crypto assets in registered savings plans, and place crypto-asset service providers on par with their traditional finance counterparts:
- Clarification of Tokenized Real-World Assets: Tokenized stocks, bonds, and funds should be treated as qualified investments, consistent with their non-digital counterparts.
- Recognition of Fiat-Backed Stablecoins (FBSCs): FBSCs, given their functionality and utility in the crypto ecosystem, should be classified as digital cash equivalents and a permitted holding in registered savings plans.
- Support for Regulated Crypto-Asset Trading Platforms (CTPs): CTPs that are members of the Canadian Investment Regulatory Organization (CIRO) should be recognized on par with designated exchanges, broadening the list of service providers and types of assets for registered savings plans.
Conclusion
CW3 firmly believes that the continued inclusion of crypto-backed assets as qualified investments will benefit Canadian investors and the broader economy. Such inclusion supports innovation, empowers individual investors, and aligns with global market trends. Policymakers are urged to consider the broader implications of tax policy on product innovation and market participation, ensuring that Canada remains a leader in the evolving digital asset landscape.
By adopting these recommendations, Canada can foster a more inclusive and forward-thinking investment environment, promoting the growth and adoption of Web3 technologies nationwide.
