Canada’s new crypto regulations

Canada’s top financial regulator has introduced its first-ever framework to limit the exposure of federally regulated financial institutions, like banks and insurers, to crypto assets (nice!). 

What happened: Starting in Q2 of 2023, financial firms must notify the Office of the Superintendent of Financial Institutions (OSFI) if “Group Two” crypto assets (the definition of which is vague but includes basically all cryptocurrencies) exceed 1% of capital.

  • On the other hand, “Group One” crypto assets (defined by their safeguards ties to a tangible asset) will receive the same treatment as comparable traditional assets.

The framework also says that firms should notify their lead supervisor if they plan to engage in crypto assets and includes a long list of considerations per existing requirements before a firm can take the fearless plunge on a Bored Apes Dogecoin.

Why it matters: Financial institutions have an outsized impact on the Canadian economy. By limiting their exposure to volatile assets like crypto and ensuring money managers take calculated risks, the idea is that the economy will be better off overall.