Canada Proposes New Capital Rules for Cryptocurrency Holdings

Canada Cryptocurrency Holdings

The Office of the Superintendent of Financial Institutions (OSFI) in Canada is initiating public consultations on two draft guidelines aimed at updating the capital and liquidity approach to crypto assets. 

These proposed changes seek to simplify how institutions handle perceived crypto risks by defining four categories of crypto assets and their respective capital treatment.

The OSFI’s public consultations on the two draft guidelines will be open until September 20. One of the guidelines focuses on federally regulated deposit-taking institutions like banks and credit unions, while the other addresses the regulatory capital treatment of crypto-asset exposure for insurers.

The OSFI’s aim is to adapt to an ever-changing risk environment, taking into account the new banking standards for crypto-asset exposure outlined by the Basel Committee in December 2022. 

According to 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,”

These new international banking standards, including provisions related to tokenized traditional assets, stablecoins, and unbacked crypto assets, are set to be implemented by January 1, 2025.

Furthermore, the OSFI’s drafts have been designed to align with the specific needs of the local insurance industry, ensuring that the guidelines cater effectively to the sector.

These forthcoming guidelines are set to replace an existing advisory published in August 2022, which addressed crypto-asset exposure and its potential risks for financial institutions. 

The evolving regulatory landscape in Canada reflects the growing concerns about the impact of digital assets on banking systems worldwide, as witnessed by events like certain crypto-friendly banks suspending operations due to liquidity issues in 2022.