Canada's financial regulator proposes strict new guidance for crypto asset exposure

Quick Take

  • Canada’s financial regulator proposed new capital and liquidity requirements for bank and insurer crypto-asset exposure.

Canada's financial regulator proposed strict new guidelines for bank and insurance sector crypto-asset exposure. 

The Office of the Superintendent of Financial Institution's guidelines advise banks and insurers on capital and liquidity risks when dealing with crypto-assets. The OSFI said the new rules "reflect an evolving risk environment and international developments."

The regulatory guidelines come in two parts — one for banks, the other for insurers. "Today, OSFI announced two draft guidelines, one for federally regulated deposit-taking institutions and another for insurers, on the regulatory capital treatment of crypto-asset exposures," the regulator said.

Crypto exposure limits and risk weighting

The proposal said crypto-assets should be categorized into two broad groups — one category for tokenized traditional assets and stablecoins, and the other for unbacked crypto assets. The guidelines said banks should have an exposure limit of no more than 1% for unbacked crypto assets.

It gave an example of how banks should consider the risk weighting of tokenized and traditional assets. "A tokenized corporate bond held in the banking book will be subject to the same risk weight as the non-tokenized corporate bond held in the banking book," the guidelines state. However it underlines that "a tokenized asset may have different market liquidity characteristics than the traditional, non-tokenized, asset."


Keep up with the latest news, trends, charts and views on crypto and DeFi with a new biweekly newsletter from The Block's Frank Chaparro

By signing-up you agree to our Terms of Service and Privacy Policy
By signing-up you agree to our Terms of Service and Privacy Policy

The speed with which creditors could take possession of crypto-asset collateral was addressed. Banks are advised to assess whether crypto-asset collateral can be liquidated in a way that meets legal certainty requirements. 

Update on Basel Committee standards

The OSFI said it drafted the detailed guidance on crypto-asset exposure as an update to proposals released by the Basel Committee on Banking Supervision in December 2022. “They have been updated to reflect the Canadian context and the industry for which the guideline has been developed, i.e. banking or insurance,” the OSFI wrote.

“The banking guideline reflects the December 2022 BCBS banking standard and the insurance guideline incorporate the relevant parts of the BCBS standard with adjustments to meet the specific context of the insurance industry," the report added.

After the OSFI consultation period ends on September 20, the guidelines will come into effect in Q1 of 2025.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Brian McGleenon is a UK-based markets reporter for The Block. He has worked as a financial journalist and producer for multiple news outlets over the years, such as Fuji Television, The Independent, Yahoo Finance, The Evening Standard, and The Daily Express. Brian is also a screenwriter and producer with one feature film produced and one in development with Northern Ireland Screen. Apart from web3 and cryptocurrency developments, he is also interested in geopolitics, environmental issues, artificial intelligence, and longevity research. Get in touch via email [email protected].


To contact the editor of this story:
Adam James at
[email protected]