Canada Proposes Changing its Approach to Liquidity And Capital In Crypto
- A new approach to liquidity and capital in the crypto sector in Canada has been proposed by OSFI.
- The financial regulator introduced two drafts that defined four types of risks associated with crypto.
- The public consultation on the two drafts is open until September 20th, as confirmed by the OSFI via a July 26 announcement.
- The first draft deals with federally regulated deposit-taking institutions, such as banks and credit unions.
- The second one deals with the regulatory capital treatment of crypto-asset exposure for insurers in Canada.
The regulatory scenario surrounding the digital asset sector in Canada has been a major hurdle for many crypto firms that have recently exited the market due to regulatory requirements. Interestingly, the Office of the Superintendent of Financial Institutions (OSFI) stated on July 26 that it seeks to propose changes to its capital and liquidity approach to crypto assets.
According to an announcement, the financial regulator of Canada has proposed rules that will simplify institutions’ approach to perceived crypto risks and, as a result, define four types of risks associated with digital assets and their capital treatment. Additionally, public consultation on two drafts is open until September 20th.
It is crucial to note that the first draft deals with the federally regulated deposit-taking institutions, such as banks and credit unions, while the second one deals with the regulatory capital treatment of crypto-asset exposure for insurers in Canada.
“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,” said OSFI Superintendent Peter Routledge.
The regulator also confirmed that the new rules seek to reflect the “evolving risk environment” in the crypto sector, not only in Canada but around the world. Moreover, the two draft proposals also embrace the changes introduced by the Basel Committee in December 2022, which outlined new banking standards for crypto-asset exposure and will be implemented on January 1, 2025.
The regulator said that the drafts adhere to the new international banking standards, while the insurance standards are adjusted to meet the specific needs of the insurance sector in Canada. Another important fact to mention here is that the new proposal will replace an advisory published in August 2022 that defined and categorized crypto-asset exposure and its potential risks for financial institutions.
As reported earlier by Bitnation, several crypto firms have halted their business in Canada, including the world’s largest crypto exchange, Binance. The exchange said that it is “confident” that it will re-enter the Canadian market at a later date in the near future but is leaving the market due to regulatory concerns.
Decentralized crypto exchange dYdX and blockchain firm Paxos also announced their respective withdrawals from Canada earlier this year.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
