Canada's OSFI Initiates Consultation on Crypto Exposure Guidelines for Financial Institutions
Summary:
Canada's Superintendent of Financial Institutions (OSFI) is seeking feedback on proposed crypto asset exposure guidelines for federally regulated financial institutions. This follows significant losses experienced by Canadian pension funds in previous crypto investments. The new measures aim to protect Canadian citizens' savings by requiring regulated entities to disclose their cryptocurrency engagements to the OSFI. The consultation is aligned with a similar initiative by the Basel Committee on Banking Supervision and is due to conclude on January 31, 2024.
The Superintendent of Financial Institutions in Canada (OSFI) has initiated a discussion on digital asset revelation directives that should be implemented by the federally regulated financial establishments. This dialogue was previously planned into the 2023 federal budget, but the commencement aligns with an equivalent investigation led by the Bank for International Settlements (BIS).
The Canadian government mentioned in March that it aimed to establish crypto exposure rules for banks to safeguard the economy and the nation's savings. Section 5.4 of the budget, termed "Combatting Financial Crime", explains this provision. The budget also announced that federal pension funds would have to reveal their crypto exposures to the OSFI, eliminating the need for any consultations.
In 2022, Canadian pension funds had unfavorable experiences with cryptocurrencies. Quebec's Caisse de dépôt et placement- the second-largest pension fund in Canada- lost around CA$200 million ($154.7million) during Celsius's insolvency. The Ontario Teachers’ Pension Plan reported a loss of $95 million from investments in FTX and FTX.US in November 2022 and declared a permanent cessation from cryptocurrencies in April. CPP Investments, the biggest pension fund in Canada, withdrew all ongoing research concerning cryptocurrencies in December.
Moreover, the Basel Committee on Banking Supervision (BCBS) declared its own discussion on banks' cryptocurrency exposures in October. Respondents are encouraged to "provide feedback on BCBS proposals, ensuring guidelines align with the Canadian context", says OSFI. The organization asks participants in its consultations to evaluate and improve the BCBS's revelation framework. All responses are due for submission by January 31, 2024.
OSFI implemented a similar dialogue last September on liquidity requirements for banks holding crypto assets, in alignment with a BIS discussion.
Published At
11/20/2023 8:30:00 PM
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