OSFI consults on capital rules for crypto

Amid an ongoing global consultation on possible capital rules for banks’ crypto asset exposures, the Office of the Superintendent of Financial Institutions (OSFI), Canada’s federal financial regulator, is launching its own review.

Last month, the Basel Committee on Banking Supervision published a consultation paper that proposed a two-tier approach to banks’ crypto exposures. Digital editions of conventional assets would be treated much the same as the underlying assets under the proposal, while wholly digital assets such as Bitcoin would be subject to a risk weight of 1,250%.

Now, OSFI is seeking feedback from industry on the Basel Committee’s proposals, while also raising its own questions.

OSFI issued a letter on Monday saying it was “beginning to consider an appropriate prudential framework for crypto assets, with potential implications for all capital guidelines.”

The regulator is calling on federally regulated financial institutions to provide feedback on capital rules for cryptos. OSFI noted that it supports the development of a risk-sensitive capital framework for crypto exposures.

Alongside the issues raised in the Basel Committee’s paper, OSFI asked whether there are additional issues it should be considering — for example, banks’ exposures through crypto-based ETFs, an asset class that Canadian securities regulators have been among the first in the world to allow.

OSFI also seeks feedback from Canadian firms on how the proposed capital regime for cryptos would affect “current or contemplated” business models, and whether there are issues for non-bank financial firms that OSFI should consider when developing capital rules for crypto assets.

OSFI is seeking industry input by Sept. 30. The deadline for the Basel Committee’s consultation is Sept. 10.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.