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(Kitco News) - Canada’s financial regulator has proposed new changes to its capital and liquidity guidance for firms that offer cryptocurrency custody and insurance companies that offer protection for deposits.
The Office of the Superintendent of Financial Institutions (OSFI) posted a press release outlining the proposed changes on Wednesday, saying the updated rules “reflect an evolving risk environment and international developments.”
“Today, OSFI announced two draft guidelines, one for federally regulated deposit-taking institutions and another for insurers, on the regulatory capital treatment of crypto-asset exposures,” the release said.
The OSFI said it drafted more detailed guidance for Canada after the Basel Committee on Banking Supervision (BCBS) released new banking standards for crypto-asset exposures in December 2022. “They have been updated to reflect the Canadian context and the industry for which the guideline has been developed (i.e. banking or insurance),” the OSFI wrote.
“The banking guideline reflects the December 2022 BCBS banking standard,” they said. “The insurance guideline incorporates the relevant parts of the BCBS standard with adjustments to meet the specific context of the insurance industry.”
“Each guideline includes a simplified option and a comprehensive option for the regulatory treatment of crypto-asset exposures,” the OSFI said in a separate letter to the public. “This allows institutions to choose the approach best suited to their needs and situation.”
Whether a bank chooses the comprehensive plan or simplified plan depends “on the extent of an institution’s exposure to crypto-assets,” the release said. “Both guidelines detail four classifications of crypto-assets and the capital treatment for each.”
The regulator is seeking the public’s feedback on the proposals and has established a consultation period that will go until September 20.
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| Canada releases guidelines for investment funds holding crypto assets |
OSFI first introduced this initiative in their Annual Risk Outlook 2023-24, which included a commitment “to consulting on updates to the interim approach for the capital and liquidity treatment of crypto-asset exposures.”
“These guidelines are different from public disclosure of crypto-asset exposures for federally regulated financial institutions mentioned in Budget 2023,” the OSFI noted. “They are also distinct from the recent consultation we launched on fiat-referenced crypto-asset arrangements.”
If approved, the guidelines will replace the interim advisory on the regulatory treatment of crypto-asset exposures, published in August 2022, when they come into effect in early 2025.
“Deposit-taking institutions and insurers need clarity on how to treat crypto-asset exposures when it comes to capital and liquidity,” said Peter Routledge, Superintendent of Financial Institutions. “We look forward to giving them this clarity through these new guidelines that reflect industry input and international standards.”
