OSFI Drafts Guidelines for Crypto-Asset Regulation
In a significant move, the Office of the Superintendent of Financial Institutions (OSFI) in Ottawa, Canada, has proposed an overhaul of the capital and liquidity approach for crypto-assets. OSFI aims to align with the evolving risk landscape and the international developments in this sector. Two draft guidelines — one for federally regulated deposit-taking institutions and another for insurers — are outlined for the regulatory capital treatment of crypto-asset exposures.
Aligning with Basel Committee’s New Banking Standards
OSFI’s proposed revisions are in response to the new banking standards for crypto-asset exposures released by the Basel Committee on Banking Supervision in December 2022. OSFI has used this opportunity to create comprehensive guidance tailored for the Canadian financial sector. A public consultation period for these draft guidelines is set until September 20, 2023.
Adopting Simplified and Comprehensive Approaches
The new guidelines suggest two distinct methodologies — a simplified one and a comprehensive one, depending upon the level of an institution’s exposure to crypto-assets. Four crypto-asset classifications and the respective capital treatment for each category have been outlined.
Implications for Banking and Insurance Industries
The proposed banking guideline aligns with the banking standard issued by the Basel Committee on Banking Supervision, while the insurance guideline incorporates relevant components of the same, making necessary adjustments to accommodate the specificities of the insurance industry. The guidelines are scheduled for implementation in early 2025, which will then supersede the interim advisory published in August 2022.
Canada’s Move in Global Crypto Regulation Landscape
Canada’s recent actions in tightening regulations on cryptocurrency firms indicate a coordinated effort with US regulators. The rest of the world is following suit, with Binance and Coinbase exiting Canada and the European Union issuing new regulations, prompting the emergence of new global crypto hubs. The full implications of these regulatory changes, however, remain to be seen.