OSFI consults on crypto rules for banks, insurers

As part of the ongoing global effort to regulate the fledgling crypto sector, federal financial regulators are proposing new capital and liquidity treatments for financial institutions’ crypto exposures.

The Office of the Superintendent of Financial Institutions (OSFI) issued a pair of draft guidelines — one for banks and one for insurers — setting out its proposed approach to capital and liquidity treatment for firms’ cryptoasset exposure.

The regulator said the new guidance, which will take effect in the fiscal first quarter of 2025, is designed to “reflect an evolving risk environment and international developments.”

Those developments include global policymakers’ latest efforts to address crypto-related risks. In particular, OSFI’s draft guidance reflects new standards issued by the Basel Committee on Banking Supervision in December.

“In response [to those standards], OSFI has taken the opportunity to draft this more detailed guidance for Canada,” the regulator said, adding that its guidance follows the new Basel standards and is tailored to the Canadian industry.

The draft guidance features both a “simplified” and “comprehensive” option for firms. The simplified approach, for firms with limited crypto exposure, requires them to simply deduct all these exposures from their capital. The comprehensive option requires firms to categorize their crypto holdings into one of four buckets and then apply specific capital treatments to these different categories.

“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, in a release. “We look forward to giving them this clarity through these new guidelines that reflect industry input and international standards.”

When the new guidance takes effect, it will replace OSFI’s interim approach to banks’ and insurers’ crypto exposures, which was adopted last August.

“Our approach will continue to evolve along with the crypto-asset market,” the regulator said in a letter to industry firms setting out the draft guidance.

The drafts are now out for comment until Sept. 20. OSFI intends to finalize its rules by March of next year.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.