In Canada, cryptocurrency can be used as collateral, which has raised several concerns for lenders to consider.

 

In Canada, cryptocurrency can be used as collateral, which has raised several concerns for lenders to consider.   Crypto most likely falls under "intangible property;" therefore, lenders should consider personal property security legislation accordingly.  When issuing crypto, lenders should consider due diligence practices such as:  Location of crypto: is the crypto in a digital wallet or under the possession of a third party? Borrowers should have full control over their digital wallet, and crypto should always be held in the borrower's wallet.  If the crypto is managed by a third party, such as a custodian, then ensure it is registered with a regulatory body such as the U.S. SEC.  Quality of crypto: Choose crypto included in the top 10 highest volume list of crypto (check the published list on CoinCap).  Assess security law violations/risks: Bitcoin and Ether are considered commodities in Canada. Double-check if the crypto is a security versus a commodity in its jurisdiction.  Consider global and U.S. stock market conditions: There is an increased correlation between the price of crypto and U.S. stock indices. Therefore, lenders should pay attention to global market volatility.  Lenders should ensure that crypto assets are described accurately and disclose information on crypto wallets.