As cryptocurrency popularity grows in Canada, the OSFI has issued new recommendations to assist banks in managing their risk.
Summary
• The framework requires banks with little exposure to reduce holdings from their capital, but banks with substantial exposure must classify assets depending on risk.
• The new restrictions will take effect in 2026, and the OSFI is considering providing data on banks’ cryptocurrency exposure while evaluating capital adequacy criteria.
• Canada’s banking watchdog has issued new rules to assist banks in managing their crypto exposure, recognizing the growing popularity of digital assets.
The Office of the Superintendent of Financial Institutions (OSFI) released the final guidelines Thursday as part of its quarterly update. The regulator has also launched a consultation on capital adequacy standards, with the expectation that a new government in the United States may loosen banking laws.
Osfi Takes Crypto Risk Precautions as Use Expands
OSFI has investigated how banks assess crypto-related risk, particularly as Canadians increasingly hold cryptocurrencies like Bitcoin and utilize trading platforms.
The new approach requires lenders to assess their cryptocurrency holdings and their clients’ exposure to digital assets. While the OSFI presently considers the danger to Canada‘s financial system to be modest, Angie Radiskovic, OSFI’s Assistant Superintendent and Chief Strategy and Danger Officer, stated that cryptocurrency activity is fast increasing.
According to a December Bank of Canada study, Bitcoin ownership increased dramatically in 2021 when compared to 2018. The proportion rose from 5% in 2018 to 13% in 2021, with men accounting for the majority of the increase.
The OSFI’s new suggestions set up a two-tiered system for figuring out how cryptocurrency exposure affects bank capital and liquidity. Both of these are crucial for keeping the financial system stable during a recession.
This method requires banks with limited exposure to crypto-assets to take their entire crypto-asset holdings away from their common equity tier 1 (CET1) capital. CET1 capital is a standard way to measure how much capital is available to absorb losses, and it makes sure that banks keep enough capital buffers. Meanwhile, banks with greater holdings must categorize their digital assets based on their risk profile, implementing various capital requirements on an individual basis.
Canadian Banks Possess Negligible Cryptocurrency Assets
According to Amar Munipalle, executive director of OSFI’s Risk Advisory Hub, the vast majority of Canadian banks have little to no direct or indirect exposure to cryptocurrencies. According to Munipalle, most banks just facilitate transactions connected to their clients’ crypto activity and do not hold huge quantities of digital assets on their records.
The new laws will go into effect in early 2026, and the OSFI has stated that it is contemplating making regulatory data on banks’ exposure to cryptoassets public.
In addition to its crypto regulations, the OSFI has launched a consultation on capital adequacy criteria, which specify the minimum amount of capital that banks must keep in the event of loan or investment portfolio losses.
Without appropriate capital reserves in banks, the economy may destabilize, as demonstrated by the 2008 global financial crisis. Last Monday, the OSFI blocked planned increases in capital levels under the Basel III framework, which sought to strengthen global financial stability. The proactive implementation of such measures in Canada has split views, with some claiming that it puts the country’s banks at a disadvantage in comparison to overseas rivals.
US President Donald Trump’s planned dismantling of banking rules has also influenced OSFI to postpone capital increases. “We anticipate reconsidering our transition plans once we see clearer coordination among the key jurisdictions on how to apply the law, as well as a comprehensive picture of the impact on our banks—many of whom are global players,” Munipalle added.
These regulatory amendments underscore Canada’s efforts to safeguard financial stability while keeping up with the rapid expansion of the digital asset industry.
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