On July 26, the Office of the Superintendent of Financial Institutions (OSFI), the Canadian regulator overseeing financial institutions, announced its intention to update its “capital and liquidity approach to crypto-assets.” The move comes as a response to the Basel Committee on Banking Supervision’s latest banking standards concerning crypto-asset exposures.
The primary aim of the proposed changes is to adapt to the evolving risk landscape and keep pace with international developments. To gather public input, OSFI has released two draft guidelines for consultation. The first draft outlines how regulated deposit-taking institutions should handle regulatory capital in relation to crypto-asset exposures, while the second focuses on insurers’ approach.
Interested parties and stakeholders have until September 20, 2023, to provide their feedback on the draft guidelines. These guidelines were developed in light of the Basel Committee’s new standards unveiled in December 2022 and are expected to take effect in early 2025.
According to Peter Routledge, the Superintendent of Financial Institutions, there is a need for clarity on how deposit-taking institutions and insurers should treat crypto-assets in terms of capital and liquidity. The new guidelines aim to address this need, incorporating industry input and aligning with international standards.
The proposed guidelines offer two approaches: a simplified one and a more comprehensive option. The choice of approach depends on the extent of an institution’s exposure to crypto-assets. Additionally, the guidelines outline four classes of crypto assets and specify the corresponding capital treatment for each.
Notably, while the new guidelines are in the consultation phase, the interim advisory issued in August 2022 will remain in effect until the updated guidelines become officially effective.
The regulator’s proactive stance in adapting to the changing landscape of crypto-assets indicates Canada’s commitment to aligning with global financial standards and ensuring a robust and well-regulated financial ecosystem for these emerging assets. Readers are invited to share their opinions on this development in the comments section below.
Frequently Asked Questions (FAQs) about crypto-assets regulations
What is the purpose of the Canadian regulator’s proposed changes to its ‘Capital and Liquidity Approach to Crypto-Assets’?
The purpose of the proposed changes is to adapt to the evolving risk environment and align with international developments regarding crypto-asset exposures. The Canadian regulator, the Office of the Superintendent of Financial Institutions (OSFI), aims to provide clarity for regulated deposit-taking institutions and insurers on how to handle capital and liquidity in relation to crypto-assets.
What has the Canadian regulator, OSFI, done to gather public input on the proposed changes?
To gather public input, OSFI has unveiled two draft guidelines for consultation. One draft focuses on the regulatory capital treatment of crypto-asset exposures for regulated deposit-taking institutions, while the other draft is targeted at insurers.
When is the deadline for the public consultation on the draft guidelines?
The deadline for the public consultation on the draft guidelines is September 20, 2023.
What is the background for these proposed changes?
The proposed changes are in response to new banking standards for crypto-asset exposures introduced by the Basel Committee on Banking Supervision in December 2022.
When are the new guidelines expected to take effect?
The new guidelines are expected to take effect in early 2025.
How will the proposed guidelines handle different levels of exposure to crypto-assets?
The proposed guidelines offer two approaches, a simplified one and a more comprehensive one, depending on the extent of an institution’s exposure to crypto-assets.
What are the classes of crypto-assets outlined in the guidelines?
The guidelines specify four classes of crypto assets, with each class having its respective capital treatment.
What happens to the existing advisory while the new guidelines are in the consultation phase?
The existing Aug. 2022 interim advisory will remain in effect until the new guidelines become officially effective.
More about crypto-assets regulations
- Office of the Superintendent of Financial Institutions (OSFI) – Official Website
- Basel Committee on Banking Supervision – Official Website
- Crypto-Asset Exposures – Basel Committee on Banking Supervision – Dec. 2022 Publication