Canada's equities regulator has removed crypto funds from the list of assets eligible for reduced margin due to high risks such as volatility and liquidity.
CIRO's new rules for crypto funds
On February 5, CIRO announced the new List of Securities Eligible for Reduced Margin (LSERM). This list outlines which stocks can have lower margin rates. CIRO stated that until further notice, cryptocurrency funds are not eligible for reduced margins.
Asset criteria for reduced margin eligibility
Assets that are easy to buy and sell, have a large market value, and are not very volatile are more likely to qualify. Criteria include a price volatility of less than 25%, high liquidity with a public float value of over CAD 100 million, and a minimum daily trading volume of 25,000 shares.
Crypto development in Canada
Canada has historically not been the most favorable for crypto investors. In 2021, regulators stated that crypto trading platforms would operate as limited traders. Despite this, about 52% of financial institutions offer at least one crypto option.
The decision to exclude crypto funds from reduced margin eligibility is due to high risks. The liquidity and volatility requirements suggest that currently, crypto-assets don't meet these criteria.
