Canada’s OSFI eyes risk management with proposed Crypto-asset guidelines

The Office of the Superintendent of Financial Institutions (OSFI) is taking strides to adapt to the rapidly changing digital asset landscape. Reflecting the shifting risk environment and emerging global patterns, OSFI is introducing modifications to its capital and liquidity guidelines for crypto-assets.

In its most recent announcement, OSFI has unveiled two provisional guidelines aimed at streamlining the regulatory capital treatment of crypto-asset exposures. These guidelines are designed for federally regulated deposit-taking institutions and insurers, laying the groundwork for a more robust regulatory framework.

The initiative follows the Basel Committee on Banking Supervision’s launch of new banking standards for crypto-asset exposures in December 2022. Seizing the opportunity to refine their regulatory approach, OSFI is stepping forward with comprehensive guidance tailored to the Canadian financial ecosystem.

Open for public input until September 20, 2023, the draft guidelines invite constructive feedback via email. These comprehensive guidelines are set to replace the interim advisory on the regulatory treatment of crypto-asset exposures, first issued in August 2022. The new regulatory standards are projected to be implemented in the early part of 2025.

Superintendent of Financial Institutions Peter Routledge said, “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 guidelines propose two distinctive approaches, a simplified method and a comprehensive one, hinging on the magnitude of an institution’s exposure to crypto-assets. Each guideline elucidates four categories of crypto-assets, along with the capital treatment for each classification.

The banking guideline mirrors the BCBS banking standard issued in December 2022. In contrast, the insurance guideline integrates pertinent sections of the BCBS standard with requisite adjustments to align with the specific context of the insurance industry. Until the new guidelines are ratified, the August 2022 interim advisory continues to hold sway.

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