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Canadian regulator joins FED, details liquidity rules

The risks associated with cryptos continue to worry regulators. Even if some people think that they present great opportunities, it is still necessary to keep them under control. And that’s what the Canadian banking regulator intends to do.

crypto canada

Canada joins European and American authorities

The massive adoption of cryptocurrencies is pushing regulators to make drastic decisions to keep the sector under control. The more time passes, the more investors become interested in these assets. However, the risks are not insignificant.

As a result, to protect negotiators, the Office of the Superintendent of Financial Institutions (OSFI) of Canada has decided to limit exposure to cryptocurrencies and has detailed liquidity rules for banks under its supervision. Thus, it issued interim guidelines last Thursday. According to these, the regulatory body classifies crypto assets into two categories.

The first represents traditional assets that confer rights and obligations. As for Group 2, it would encompass most digital assets. Therefore, financial institutions must inform the OSFI if their type exposure exceeds 1% of their Type 1 capital. The same rule applies if their net short positions exceed 0.1% of their capital.

An important decision for the regulator

The decentralization of digital assets is a big problem for governments. As a result, the Office of the Superintendent of Financial Institutions believes that these guidelines are a big step to ensure caution in a sector as unstable as that of cryptos.

As in many countries, the field is largely unregulated in Canada. Thus, following the example of the US Federal Reserve (FED) and the ECB, OSFI has asked the supervised entities to inform the regulator in writing before any activity based on cryptos.

The new guidelines from the Canadian regulator will come into force in the second quarter of 2023. However, Superintendent Peter Routledge is convinced that this interim approach will reduce the regulatory uncertainty that has prevented central banks from integrating cryptos into their balance sheets.

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Eddy Senga avatar
Eddy Senga

The world is changing and adaptation is the best weapon to survive in this undulating universe. Crypto community manager at the core, I am interested in everything related directly or indirectly to the blockchain and its derivatives. In order to share my experience and make known a field that I am passionate about, there is nothing better than writing informative and casual articles at the same time.

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