Canada’s financial watchdog recommends adjusting its capital and liquidity approach to crypto assets.
The Office of the Superintendent of Financial Institutions (OSFI) claims that the proposed guidelines, which define four kinds of cryptocurrency assets and their capital classification, will simplify institutions’ approaches to perceived crypto risks. Up to September 20, OSFI allows public comment on two draft guidelines.
One of the regulations impacts federally regulated deposit-taking organizations, such as banks and credit unions, and another deals with how insurers’ exposure to cryptocurrency assets is treated in terms of regulatory capital. OSFI Superintendent Peter Routledge:
“Deposit-taking institutions and insurers need clarity on how to treat crypto-asset exposures when it comes to capital and liquidity. We look forward to giving them this clarity through these new guidelines that reflect industry input and international standards,”
The new regulations aim to consider an “evolving risk environment,” according to the agency. The regulations also cover modifications made by the Basel Committee in December 2022 that outline new banking requirements for exposure to cryptocurrency assets, with implementation scheduled for January 1, 2025.
Stablecoins, unbacked crypto assets, and tokenized traditional assets are all covered by the new Basel Committee requirements. The OSFI claims that while the insurance standards have been modified to address the particular requirements of the regional insurance business, their drafts also consider the most recent global banking standards.
The new standards will also replace a previous advice that classified and characterized crypto-asset exposure and its possible hazards for financial institutions, and it was released in August 2022.
The regulatory environment in Canada is changing as global worries about the effects of digital assets on banking institutions grow. In the US, crypto-friendly institutions like Silvergate and Signature Bank closed their doors in 2022 due to liquidity problems from crypto-related events.
