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On November 16, 2022, a joint statement was published to federally regulated entities engaged in crypto-asset activities or crypto-related services by the Office of the Superintendent of Financial Institutions (OSFI), the Financial Consumer Agency of Canada (FCAC) and the Canada Deposit Insurance Corporation (CDIC). OSFI, FCAC and CDIC are key members of Canada’s Financial Institutions Supervisory Committee.

The joint statement explicitly reinforces “the expectation that […] federally regulated entities adhere to all applicable current regulatory requirements and guidelines when providing crypto-related services or engaging in crypto-asset activities.” and ensure that these risks have properly accounted for” and that these entities comply with existing federal financial laws, including the Banking Act,
Insurance Companies Act, Trust and Loan Companies Actand Proceeds of Crime (Money Laundering) and Terrorist Financing Actas well as any regulations or guidelines issued by federal and provincial regulatory agencies.

In addition, the joint statement addresses the core competencies of OSFI, FCAC and CDIC as follows:

  • Prudential Regulation (OSFI): The joint statement refers to OSFI’s proposal Digital Innovation Roadmap, also released on November 16. The proposed roadmap sets out OSFI’s digital priorities in the evolving digital finance ecosystem. This includes the creation of a Digital Innovation Impact Hub whose work plan is currently focused on four key pillars: advancing policy work, creating a regulatory sandbox, developing oversight practices and tools and strengthen stakeholder engagement. As part of its policy work, OSFI is working with domestic and international partners to consider approaches to prudential regulation of stablecoin agreements, and OSFI plans to provide additional clarification and/or advice on areas of risk management and governance of digital assets in Canada, starting with stablecoin arrangements, followed by other related activities including crypto custody, crypto lending, crypto staking and other applications DeFI, and finally a review of other technologies, such as payment innovation, open banking, artificial intelligence and machine learning. As part of the Roadmap, OSFI is seeking public consultation on two issues:

    • The first is whether, in addition to providing additional clarity on areas of risk management and governance that are specific to stablecoin agreements and custody of crypto assets, there are other priority areas or digital innovation topics OSFI should focus on in the short to medium term. term

    • The second concerns the proposed regulatory sandbox and seeks to understand whether respondents have an interest in learning more or participating in the sandbox and, if so, for what type of products and services.


    Comments are sought from regulated and non-regulated entities on these issues; the deadline for responses is January 19, 2023. It is encouraging that OSFI is considering a sandbox approach in this space that builds industry engagement and balances thoughtful prudential regulation with innovation.


    The joint statement also refers to the recently released publication Interim provisions for the treatment of regulatory capital and liquidity of crypto-asset exposures, which provides a capital and liquidity framework considering two classes of crypto assets. First, “group 1” assets, being digital representations of traditional assets (e.g. a corporate bond or a token bank deposit), which can be traded against the underlying traditional assets (the corporate bond company or bank deposit), provided that all criteria set out in the framework are met. Second, “group 2” assets, a residual category that includes all other crypto assets that do not meet the criteria for group 1. This category includes cryptocurrencies like Bitcoin and Ethereum, which are subject to a more conservative prudential treatment.

  • consumer protection (FCAC):The joint statement provides that “the FCAC expects regulated entities planning to develop or offer crypto-assets to notify the Agency and provide any information requested by the FCAC.” The term “crypto-assets” is broadly defined in the Joint Statement as “any digital asset implemented using cryptographic techniques”. The phrase “develop or offer” is not defined, but suggests (along with the definition of “crypto-assets”) a broad scope. The joint statement also refers to the recently released publication Financial Consumer Protection Framework: enhanced protection for bank customerswhich is a general (non-crypto specific) framework designed to strengthen consumer protections applicable to all federally regulated entities.

  • Deposit insurance (SADC): The joint statement recalls that crypto-assets are not eligible for deposit insurance under the CDIC Actand insists that CDIC member institutions should provide consumers with clear, accurate and accessible information on deposit insurance protection.

These measures are particularly notable in the context of the ongoing “crypto winter”. As we wrote in a Update released August 5, 2022, the mix of rights and interests that is typical of crypto-related entities (for example, where the owners of a company’s shares also own the crypto-assets that are issued, sold, or traded by the company) can create significant risks for consumer protection, as well as the stability, integrity, confidentiality and security of the financial system. The Joint Statement is designed to address these risks.

Towards a holistic national approach

The joint statement is notable for signaling a level of collaboration between federal regulators, underscoring the magnitude of the potential impact of crypto-assets and crypto-related activities on the Canadian financial system.

As crypto markets grapple with complex questions of jurisdiction and characterization, regulators across Canada and around the world have attempted to form a collective picture of how best to regulate the digital asset industry, and many have lamented the pace of progress in this regard, including capital market regulators (as we discussed here here and here). The form of coordination in the joint declaration is particularly new and welcome.

That said, the joint filing only applies to federally regulated entities. The integration of other market participants will require coordination and cooperation between the 13 provincial and territorial jurisdictions, as well as the Investment Industry Regulatory Organization of Canada (IIROC) and its soon to be established successor (as we we discussed here), for a truly holistic national approach.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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