Canada Regulator Proposes Fresh Directives For Crypto Assets

OSFI's proposed guidelines target federally regulated deposit-taking institutions, including banks and credit unions, as well as insurers.

Canada's financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), has proposed significant changes to its approach regarding capital and liquidity for crypto-assets. The move comes in response to the perceived risky environment surrounding cryptocurrencies and aligns with international banking standards.

OSFI's proposed guidelines target federally regulated deposit-taking institutions, including banks and credit unions, as well as insurers. The primary objective is to provide these financial entities with clear directives on how to treat their exposure to crypto-assets in terms of capital and liquidity requirements. Superintendent Peter Routledge emphasised the need for clarity, and the regulator aims to achieve this through the implementation of the new guidelines.

The draft guidelines are now open for public consultation and will be available for review until September 20. If approved, they are expected to be put into effect in early 2025. The proposed guidelines are intended to replace the interim advisory on the regulatory treatment of crypto-asset exposures, which was published in August 2022.

This development comes after OSFI previously increased the capital requirements for the country's major lenders in June. The move involved raising the stability buffer by 50 basis points to 3.5 per cent. The decision was driven by concerns over rising borrowing costs, high levels of debt, and stress on the financial system.

The Canadian financial regulatory landscape is evolving in response to the rapidly growing crypto market and its potential impact on the stability of the financial sector. By providing clear guidelines, OSFI aims to enhance risk management and ensure a more robust approach to handling crypto-assets for banks and insurers operating under its purview.

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