Canadian Regulator Proposes Changes to Its 'Capital and Liquidity Approach to Crypto-Assets'

The regulator of financial institutions in Canada said on July 26 that it had started the process of gathering the public’s view on proposals to change its “capital and liquidity approach to crypto-assets.” The draft guidelines are a response to the Basel Committee on Banking Supervision’s new banking standards for crypto-asset exposures.

Staying Abreast With International Developments

The Canadian regulator known as the Office of the Superintendent of Financial Institutions (OSFI) announced on July 26 that it is “proposing changes to its capital and liquidity approach to crypto-assets.” According to a statement, OSFI’s proposed new approach is intended “to reflect an evolving risk environment and international developments.”

As per the statement, the Canadian regulator kickstarted the process to gather the public’s view by unveiling two draft guidelines. One draft is focused on the regulatory capital treatment of crypto-asset exposures by regulated deposit-taking institutions, while the other draft is targeted at insurers.

The draft guidelines, which are now open for public consultation until September 20, 2023, are in response to new banking standards for crypto-asset exposures which were unveiled in Dec. 2022 by the Basel Committee on Banking Supervision. OSFI also revealed in the statement that the new guidelines are expected to take effect in early 2025.

New Guidelines to Bring Clarity

Meanwhile, in remarks accompanying the statement, Peter Routledge, the Superintendent of Financial Institutions, 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.

According to the statement, the new guidelines propose two approaches, a simplified and a more comprehensive one. The use of either approach will depend on the “extent of an institution’s exposure to crypto-assets.” The guidelines also detail the four classes of crypto assets and the respective capital treatment for each.

However, according to OSFI, the Aug. 2022 interim advisory will remain in effect between now and when new guidelines become effective.

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