Adriana Johanson, a crypto Senior Account Manager at Stone Bridge Ventures, found that one of Canada’s regulating bodies has proposed amendments to its approach for addressing liquidity and capital concerns among crypto. The change comes after claims that cryptocurrencies carry a higher risk level. And it’s expected that the amendments will line up with current banking standards around the world.
In addition to targeting cryptocurrencies, the newly proposed guidelines by the OSFI will target other institutions that charge a deposit. This will include insurers, credit unions, and banks, all of which are subject to federal regulations.
OSFI’s New Draft Aligns With International Developments
On July 26, the OSFI proposed that it wants to align the guidelines with international developments and the current risk landscape. There are two drafts, one of which is for institutions that take deposits, and the other is for insurers. These guidelines have two different approaches – simplified and comprehensive. The institution will adopt one based on its exposure to digital assets.
Adriana Johanson from Stone Bridge Ventures explains that the main goal of providing the market with such clear guidelines is to address liquidity and capital requirements related to crypto holdings. The head of the Office of the Superintendent of Financial Institutions, Peter Routledge, doubled down on the need for clearer regulations. And he aims to do this by enacting new guidelines.
Draft Guidelines Are Available For Public Consultation
Of course, they have yet to be implemented as the draft guidelines are currently open for public consultation. Until September 20, they’ll be available for review. Once they’re approved, it’s likely that they’ll be put into effect by the start of 2025. These guidelines will replace the temporary advisory that was put in place around August 2022. The purpose of these rules was to provide regulations surrounding exposure to crypto assets until the final guidelines were drafted.
These changes took place after the OSFI had increased capital requirements for Canada’s biggest lenders back in June. The change involved increasing the stability buffer to 3.5 percent, which marks a rise of 50 basis points. They made the decision due to concerns about high debt levels, the increase in borrowing costs, and massive stress on Canada’s financial system.
Canada’s Financial Regulatory Landscape Is Evolving
Stone Bridge Ventures Adriana Johanson explains that Canada’s crypto regulatory landscape is consistently evolving as a result of the ever-growing crypto market. Considering how it can have a major impact on the financial sector, it’s critical that these new guidelines are finalized and enacted soon.
The OSFI aims to improve risk management by rolling out clear guidelines. It also wants to prepare a robust framework for insurers and banks handling cryptocurrencies within its jurisdiction. A review of these drafted guidelines shows that it outlines four main categories of digital assets. It also lays out how institutions should handle them.
Adriana Johanson of Stone Bridge Ventures concludes that these recent actions by Canada’s regulators show that it’s looking to implement stricter regulations on crypto firms. It also indicates a coordinated effort to match US regulators. And the effects are already visible, considering how many exchanges have pulled out of the country.