New crypto rules issued for Canadian banks, insurers: Details

Per new interim rules from Canada’s financial regulator, banks and insurers will soon have to limit their exposure to crypto assets to a small proportion of their capital. Per Bloomberg,

“Financial firms need to notify the Office of the Superintendent of Financial Institutions if their gross exposure to type 2 crypto assets—which, under the regulator’s definition, would likely encompass most cryptocurrencies—exceeds 1% of their Tier 1 capital.”

Additionally, firms should notify the OSFI if their total net short positions on those assets exceed 0.1% of Tier 1 capital. Notably, these rules will come into force in Q2 next year.

Canadian banks and insurers must limit their exposure to crypto assets to a small fraction of their capital under new interim rules from the country’s financial regulator https://t.co/xnKJaZs7gI

— Bloomberg (@business) August 18, 2022

Opining on the same, Superintendent Peter Routledge said in a statement,

“We have provided this interim approach to help ensure risks in this area are managed prudently and supervised according to the principle of ‘same activity, same risk, same regulation.’”

The way ahead for Crypto in Canada

Of late, Canadian regulators have been issuing new rules and regulations. For instance, buy limits on alts for retail investors were set at $30,000 CAD recently. While for eligible investors, the number was set to $100,000 CAD. The said changes intend to protect the crypto investors and ensure that they know the risks associated with investing in this asset class. As reported yesterday, exchanges like Newton and BitBuy are implementing the same.

Read More: Canadian exchanges impose a $30k buy limit, but Bitcoin and Ethereum excluded

Now, as far as the latest interim rules for banks are concerned, Bloomberg highlighted,

“… the OSFI said that it would update its approach to reflect future developments—including the government’s legislative review of the topic, guidance from the Basel Committee on Banking Supervision and any related developments in the crypto market.”

Alongside, per the new guidelines, type 1 crypto assets may receive credit-risk capital and liquidity treatment similar to the traditional asset basket.

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