OSFI, FCAC, And CDIC Release Joint Statement Reinforcing Expectations For Crypto-Asset Activities And Crypto-Related Services

On November 16, 2022, the Office of the Superintendent of Financial Institutions (OSFI), the Financial Consumer Agency of Canada (FCAC), and the Canada Deposit Insurance Corporation (CDIC) (collectively, the Federal Agencies) released a joint statement (the Statement) addressed to federally regulated entities involved in crypto-asset activities or crypto-related services.  The Statement reinforces the Federal Agencies’ expectations that regulated entities should adhere to applicable regulatory requirements and guidance when engaging in the crypto space.

The Statement set out how the Federal Agencies are monitoring the management of risks associated with crypto-asset activities by entities.  The Federal Agencies believe that such risks should be clearly understood and addressed for any planned activity, and direct regulated entities to ensure that any crypto-asset activity complies with existing federal financial laws and issued regulations or guidance.  In accordance with this position, the Statement describes the key competencies and guidance of each of the Federal Agencies as they relate to the subject matter:

• Prudential Regulation. When dealing in the crypto space, regulated entities should consult with OSFI’s Digital Innovation Roadmap and recently published advisory on crypto-asset exposures, entitled Interim Arrangements for the regulatory capital and liquidity treatment of crypto-asset exposures.
• Consumer Protection. FCAC expects regulated entities to notify them when developing or offering crypto-assets and provide any further information requested by FCAC.  This notification allows FCAC to assess the applicability of market conduct obligations as outlined in relevant legislation and associated regulations. A definition of “crypto-assets” is included in the Statement for further guidance.
• Deposit Insurance. Crypto-assets are not eligible for deposit insurance under the current CDIC Act.  With this in mind, CDIC expects its member institutions to prioritize transparency when disclosing information on deposit insurance protection to consumers as such information is critical for them to make informed financial decisions.  This aligns with the CDIC Deposit Insurance Information By-law, which requires CDIC members to take steps to ensure that themselves and their business partners do not provide misleading or deceptive information regarding deposit insurance protection.

Summary By: Imtiaz Karamat