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Canada’s OSFI seeks feedback on banks’ ‘crypto’ disclosures

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Canada’s financial industry watchdog is seeking public feedback on financial institutions’ proposed disclosures of digital asset exposure.

The Office of the Superintendent of Financial Institutions (OSFI) acknowledged digital assets and their role in the digital economy. However, it noted that recent events have exposed the enormous risk that the industry poses, and public disclosures will enable regulators and consumers to be better placed to deal with such events in the future.

“Public disclosures are crucial for managing risks in banks and insurers, especially regarding crypto-asset exposures. We welcome feedback to tailor disclosure expectations to the Canadian context,” says Peter Routledge, the Superintendent of Financial Institutions.

The OSFI is Canada’s primary banking industry regulator and oversees insurance companies, pension plans, and trust companies.

OSFI’s move follows a proposal by the Basel Committee on Banking Supervision (BCBS) to have a globally standardized format for banks to disclose their ‘crypto’ exposure. The committee comprises 45 members, including the United States, Canada, France, the United Kingdom, and Argentina, and is headquartered at the Bank for International Settlements (BIS) in Basel, although the two remain distinct entities.

The Canadian regulator wants to know what aspects of the BCBS’ disclosure requirements it should tailor to fit Canadian banks better. It also wants feedback on what considerations it should factor in to ensure the disclosures are proportionate, as well as what other factors it should keep in mind when customizing BCBS’ proposals.

Canadians have until January 31, 2024, to submit their feedback. The watchdog will then publish a non-attributed summary of the feedback, along with its responses and the draft guidelines, early next year.

Canadian banks have avoided digital assets. Most have banned direct ‘crypto’ purchases through their credit cards, with some denying basic banking services to any related companies.

However, the country’s pension funds have invested hundreds of millions of dollars into the sector. Some of the major investments have backfired.

Caisse de Dépôt et Placement du Québec, Canada’s second-largest pension fund, invested heavily in Celsius Network. When the lender collapsed, the $305 billion fund had to write off $155 million, saying the bet was “too soon” and swore off digital assets.

The Ontario Teachers’ Pension Plan had invested in FTX, and when Sam Bankman-Fried’s house of cards imploded, it wrote off $95 million. The head of the $190 billion fund said at the time that SBF hid some critical information when he was soliciting investment.

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