Canada requests feedback on new crypto asset rules

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Canadian regulator revealed it is considering amendments to its capital and liquidity approach concerning crypto assets.

The proposed rules aim to streamline how institutions handle potential risks associated with cryptocurrencies, outlining four distinct categories of digital assets and their respective capital treatment.

In a July 26 news release from Ottawa, Canada, the Office of the Superintendent of Financial Institutions (OSFI) has proposed revisions to its capital and liquidity approach for crypto-assets. It aims to align with the evolving risk landscape and international developments.

The OSFI unveiled two draft guidelines. One is for federally regulated deposit-taking institutions. Another is for insurers, outlining the regulatory capital treatment of crypto-asset exposures.

In response to new banking standards for crypto-asset exposures released by the Basel Committee on Banking Supervision in December 2022, OSFI has taken the opportunity to create more comprehensive guidance tailored for Canada.

The two draft guidelines will undergo a public consultation until Sep. 20, 2023.

The proposed new guidelines present two distinct approaches, a simplified one and a comprehensive one, which will be adopted based on the level of exposure an institution has to crypto-assets.

These guidelines outline four crypto-asset classifications and the corresponding capital treatment for each category.

The banking guideline aligns with the banking standard issued by the Basel Committee on Banking Supervision (BCBS) in December 2022, while the insurance guideline incorporates relevant components of the BCBS standard while making necessary adjustments to suit the unique context of the insurance industry.

Once implemented in early 2025, these guidelines will supersede the interim advisory on the regulatory treatment of crypto-asset exposures published in August 2022.

Canada joins the rest of the world with stronger regulations

Canada’s recent actions in implementing more stringent regulations on cryptocurrency firms indicate a coordinated effort with US regulators.

In April, Bloomberg highlighted the 30-day ultimatum regulators gave crypto trading platforms to comply with rules or leave.

This resulted in significant exchanges like Binance and Coinbase pulling out of the country to pursue other registrations, later followed by allegations from the SEC in the United States.

At the same time, many news headlines pointed to the European Union and its release of new regulations. It resulted in Binance pulling out of the Netherlands and being under investigation by French prosecutors.

While the ramifications of these regulations are still largely unknown, it is becoming apparent that new global crypto hubs are now emerging on the brink of stronger rules in countries like Canada and the Netherlands.

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