Crypto funds will not benefit from the same reduced margin rates available to other securities. This includes stocks and exchange-traded funds (ETFs).
The decision stems from concerns over the volatility, liquidity risks, and regulatory uncertainty associated with cryptocurrencies. This makes it more expensive for investors to leverage their crypto positions.
CIRO Excludes Crypto Funds from Reduced Margin List
On February 5, CIRO released its quarterly List of Securities Eligible for Reduced Margin (LSERM). The list identifies which securities are eligible for reduced margin rates, which help improve capital efficiency and lower trading costs for financial institutions. However, crypto funds were notably absent from this list. As a result, investors who trade crypto funds will need to maintain higher collateral, adding to the cost of leveraged trading.
Why does this matter? Higher margin requirements could lead to forced liquidations during market downturns, as investors may not have enough collateral to support their leveraged positions. Reduced margin rates typically provide some breathing room, preventing liquidations until market conditions improve. Crypto’s notorious volatility is a key reason it doesn’t meet the criteria for reduced margin eligibility.
🇨🇦 LATEST: Canada bans crypto funds from reduced margin eligibility, citing volatility and liquidity risks, making leveraged trading more costly. pic.twitter.com/OQSjwGIK6w
— Cointelegraph (@Cointelegraph) February 6, 2025
CIRO’s general inclusion requirements state that securities must have relatively low price volatility, with a price volatility margin interval of 25% or less, to qualify for reduced margin.
More About Crypto Regulation in Canada
A new bill in Missouri is making waves by proposing the creation of a Bitcoin reserve fund for state investments. The 1217 bill , which aims to embrace cryptocurrency within the state’s financial infrastructure, mandates that the state accept Bitcoin as a form of payment for government services.
🟠 NEW: Missouri bill proposes a #Bitcoin reserve fund for state investments and mandates crypto acceptance for government payments. pic.twitter.com/HIPy52dNU1
— Cointelegraph (@Cointelegraph) February 7, 2025
This move is seen as a step toward integrating digital assets into mainstream financial systems and could position Missouri as a leader in the growing field of crypto adoption, boosting the appeal of Bitcoin in public sector transactions. If passed, the bill could pave the way for other states to follow suit.
Disclaimer
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