The banking regulator in Canada, the Office of the Superintendent of Financial Institutions (OSFI), has called on banks to give feedback on guidelines on how banks should report crypto exposure.
Similarly, the Basel Committee on Banking Supervision (BCBS) is asking for feedback from internationally active banks through its own consultation. OSFI specifically asked for feedback in three areas, which it said it will combine with developments coming from the BCBS.
“Digital innovation is transforming how we transact, manage money, and view value but poses risks to our financial system,” the OSFI said in a statement. “Recent crypto events underscore risks of unregulated financial innovation. Public disclosures enhance transparency, comparability of data, and market discipline for a safer financial system.”
The Canadian government is one of the most skeptical when it comes to crypto innovation. As a result, the country is also considering the launch of a central bank digital currency to bypass the use of cryptocurrencies.
Seeking feedback on crypto disclosures from banks is also one of the strategies to ensure that crypto is regulated and not used without supervision from regulators.
The draft of guidelines for crypto reporting are expected to be published by the fall of 2024, with final rules to be communicated by 2025.
The BCBS Asks Questions
As part of the feedback request, the BCBS has also released a statement requesting feedback from internationally active banks through its own consultation. According to a statement from the agency, this consultation allows the industry to provide feedback on BCBS proposals, ensuring that the guidelines align with the Canadian context.
“What, if any, technical aspects of the BCBS disclosure tables and templates should be amended for banks and insurers in the Canadian context?” it wrote in its own consultation. “What key considerations should we factor in to ensure proportionality of disclosures?”
“What other considerations raised by the BCBS consultation should we keep in mind in developing Canadian disclosure expectations?” the regulator continued.
The provided answers will be a critical part of the final rules to be released by 2025, and participating institutions have until January 31 to send it their comments.
The Move for Crypto Regulation
Canada isn’t the only country that is working on crypto regulation and ensuring that the use of cryptocurrencies doesn’t amount to a risk to the financial system. In Europe, the European Union has come up with general rules for the region, known as MiCA.
The rules which will be put into use by next year will ensure that crypto users in the region are protected and that legitimate crypto startups are also provided with the enabling environment to operate without affecting the financial system.
In the U.S, the regulators are taking a different approach by prioritizing enforcement. This led to a massive crackdown on crypto startups in the country, including Coinbase and Binance.
So far, the securities and exchange commission (SEC) which is at the forefront of the crackdown remains resolute about its enforcement actions even though there’s almost non-existent crypto rules to guide the industry.
As a result, the industry led by Coinbase is seeking for the court to demand that proper regulations be put in place. In the same manner, the company is now lobbying lawmakers to draft legislation for a regulatory framework for crypto.