The Office of the Superintendent of Financial Institutions (OSFI) has introduced new rules designed to limit Canadian banks and insurers exposure to cryptocurrencies.
Canada’s financial regulator has put in place interim rules that force banks and insurance companies to limit their cryptocurrency holdings to a small fraction of their total capital.
Going forward, Canadian financial institutions must notify OSFI if their gross exposure to cryptocurrencies exceeds 1% of their capital, the regulator said.
Firms also need to notify OSFI if their total net short positions related to cryptocurrencies exceeds 0.1% of their capital. The rules will go into effect in the second quarter of 2023.
The interim rules represent the first attempt at a framework for how Canadian financial institutions should treat cryptocurrencies, which remain largely unregulated around the world.
OSFI said it would update its approach as needed to reflect future developments, including any federal government legislation related to cryptocurrencies.
Regulatory uncertainty has kept large global banks from engaging with cryptocurrency assets by trading them or holding them on their balance sheets.
The U.S. Federal Reserve has asked banks to notify regulators before conducting crypto-related activities, but hasn’t provided details on capital requirements related to cryptocurrencies.
