As Canada’s securities regulators begin to crack down on stablecoins, most registered Canadian crypto-trading platforms are continuing to offer access to the controversial digital assets.

Stablecoins are cryptocurrencies that are intended to have a stable price and are typically pegged to a commodity, currency (like the U.S. dollar) or financial instrument. 

Regulators in Canada and around the world have expressed concern about stablecoins, citing consumer protection, money laundering and the risks inherent in blockchain technology becoming systemically important to mainstream financial systems.

In February, the Canadian Securities Administrators, an umbrella organization for provincial securities regulators, issued guidance saying it believes stablecoins “generally meet the definition of ‘security’” and that platforms must receive regulators’ written consent to list them. It also warned it “would not expect to provide consent” for stablecoins that maintain their value through an algorithm.

While many stablecoins—including two of the largest, USDT and USDC—are fully backed by reserves of fiat currency, some are backed instead by another cryptocurrency and use an algorithm to manipulate supply to keep the stablecoin’s price steady. The collapse last year of the algorithmic stablecoin TerraUSD caused widespread contagion and a prolonged bear market in crypto prices.

The Canadian Web3 Council (CW3), a crypto industry group, sent the CSA a letter late last month calling on it to reconsider its position. Issuing and selling securities to the public in Canada means following strict and expensive rules and registration procedures, and instead the CW3 is lobbying for regulators to treat stablecoins as payment instruments. A number of prominent companies, including Wealthsimple, Coinsquare and WonderFi, signed the letter. 

In the meantime, the overwhelming majority of platforms that count the Ontario Securities Commission as their principal regulator told The Logic they complied with a March 24 deadline it gave them to provide information on their listed stablecoins. And most registered platforms told The Logic they are continuing to offer their customers stablecoins while the issue plays out.

However, two platforms—Vancouver-based Netcoins and Toronto-based Newton—plan to delist Dai, a “hybrid algorithmic” stablecoin that plays an important role in DeFi markets. Dai is supported by the decentralized-finance lender MakerDao and collateralized by a basket of cryptocurrencies and other stablecoins.

Fraser Matthews, president of Netcoins, which is not a member of the CW3 and did not participate in the joint letter, said the platform plans to delist Dai “following the latest information and guidance” from regulators. 

Newton president Dustin Walper said the company expects to begin the process of delisting Dai along with QCAD and PAXG this calendar quarter, “due to a combination of factors, including low levels of trading volume and demand for these coins on our platform, regulatory uncertainty, and recent CSA requirements communicated to registered crypto-trading platforms to seek specific approval to continue listing of these stablecoins.”

Registered platforms Wealthsimple, Coinsquare and VirgoCX continue to list Dai, as well USDC, which is backed by a reserve of cash and short-dated U.S. treasuries issued by the Boston, Mass.-based fintech Circle. 

Evan Thomas, head of legal at Wealthsimple Crypto, declined to comment on what the platform will do about its listed stablecoins, which include Dai and USDC. Katrina Prokopy, Coinsquare’s chief legal officer and head of regulatory affairs, said the platform is working with regulators but is not delisting its stablecoins “for now.”

VirgoCX chief executive Adam Cai did not respond to The Logic’s requests for comment. The CSA did not provide comment before deadline.

Morva Rohani, executive director of the CW3, said she’s not surprised to hear platforms have started to delist Dai, given the guidance’s wording on algorithmic stablecoins. She said the regulators likely consider this a desirable outcome.

The fact some platforms are delisting stablecoins while others are not is evidence of how confusing and uneven the regulators’ response to the issue has been, Rohani said.

“The platforms have to kind of guesstimate their actions,” she said. “Folks are absolutely worried about enforcement.”

Rohani said the CSA has responded to the CW3’s request for an urgent meeting to address the concerns of the signatories of the letter. She said she hopes to schedule the meeting in the coming weeks. 

“We’re looking forward to that,” she said.