Canadian Regulator Issues New Rules on Exposure to Cryptocurrencies for Entities Under Its Supervision

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The pub­lic affairs office of the Super­in­ten­dent of Finan­cial Insti­tu­tions has announced an inter­im approach for cryp­to assets held by fed­er­al­ly reg­u­lat­ed finan­cial insti­tu­tions and will reduce the con­tact with cryptocurrencies.

The Super­in­ten­dent of Finan­cial Insti­tu­tions in Cana­da respon­si­ble for the super­vi­sion and reg­u­la­tion of banks, insur­ance com­pa­nies, and trust and loan com­pa­nies says there will be a set of cryp­to assets clas­si­fi­ca­tion con­di­tions that will com­ply with the new cryp­to reg­u­la­tions as well as set lim­its on their use by banks and insur­ers. Some con­di­tions will include, super­vi­sion of enti­ties that exe­cute redemp­tions, trans­fers, or set­tle­ment final­i­ty of the cryp­to asset to reduce risk in cryp­to asset expo­sures held by banks

“The scope of this advi­so­ry is lim­it­ed to the cap­i­tal and liq­uid­i­ty treat­ment of a FRFI’s expo­sures to cryp­to assets. The advi­so­ry does not address oth­er issues, includ­ing whether a FRFI is per­mit­ted under the Bank Act, Insur­ance Com­pa­nies Act or Trust and Loan Com­pa­nies Act to issue any par­tic­u­lar cryp­to asset, or to acquire or hold a con­trol­ling or sub­stan­tial invest­ment in enti­ties that engage in this activ­i­ty,” Yahoo reports.

Canada’s crypto assets will be grouped

Accord­ing to the state­ment, Canada’s cryp­to assets will be mon­i­tored in two groups, with group 1 heed­ing the clas­si­fi­ca­tion con­di­tions set and group two will be sub­ject to a more con­ser­v­a­tive pru­den­tial treatment.

“This advi­so­ry sets out OSFI’s expec­ta­tions as to when FRFIs should noti­fy their lead super­vi­sor if they intend to have expo­sures to cryp­to assets.” The guid­ance stated.

The lat­est devel­op­ment comes weeks after the Basel Com­mit­tee pub­lished a sec­ond con­sul­ta­tion doc­u­ment on the pru­den­tial treat­ment of banks’ cryp­to-asset expo­sures, which said that “Cana­da will keep an eye on the major devel­op­ments based on the over­all per­for­mance of the cryp­to market.”

Canada joins other countries to regulate crypto trading

Cana­da approved bit­coin exchange-trad­ed funds (ETFs) but the Cana­di­an Secu­ri­ties Admin­is­tra­tors and the Invest­ment Indus­try Reg­u­la­to­ry Orga­ni­za­tion of Cana­da have been strict on the indus­try requir­ing cryp­to trad­ing plat­forms and deal­ers in Cana­da to reg­is­ter with the local provin­cial reg­u­la­tors, join­ing oth­er countries.

 Cana­da adopt­ed a reg­is­tra­tion plan for trad­ing plat­forms that offer cus­to­di­al ser­vices to Cana­di­an clients. Sev­er­al firms have reg­is­tered under the new rules with guid­ance on adver­tis­ing and mar­ket­ing. The Ontario Secu­ri­ties Com­mis­sion has also aggres­sive­ly imple­ment­ed these reg­u­la­tions against unreg­is­tered for­eign trad­ing platforms. 

.For Be[In]Crypto’s lat­est Bit­coin (BTC) analy­sis, click here.

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