With the crypto sector in turmoil once again in the wake of FTX’s collapse, federal financial regulators are calling on federally-regulated firms to ensure that their dalliances with crypto comply with existing rules and laws.
Companies under the oversight of the Office of the Superintendent of Financial Institutions (OSFI), the Financial Consumer Agency of Canada (FCAC) and the Canada Deposit Insurance Corporation (CDIC) “are expected to clearly understand the risks of any planned crypto-asset activities and ensure that these risks have been properly addressed,” the agencies said in a joint statement.
Regulated firms are also required to ensure that their crypto activities comply with existing federal legislation — including banking, insurance and anti-money laundering legislation — along with any rules and guidance set by federal and provincial regulators, the statement said.
In terms of consumer protection, the statement said that regulated firms that are planning to develop or offer cryptoassets must alert the FCAC to those plans.
“This will allow FCAC to assess the applicability of market conduct obligations as outlined in relevant legislation and associated regulations,” it said.
As for the prudential treatment of firms’ crypto activities, the statement said that firms should consult OSFI’s initial approach to setting capital requirements for crypto exposures, along with liquidity and leverage rules, which it released in August.
The statement also reiterated that cryptoassets are not covered by deposit insurance, and that regulated firms are obliged to provide their customers with clear disclosure about the extent of deposit insurance protection.
The statement “reinforces the expectation that those federally regulated entities adhere to all applicable current regulatory requirements and any guidance when carrying out any crypto-related services or engaging in crypto-asset activities,” the agencies said.
They also pledged to continue to “closely monitor” the risks posed by cryptoassets, and to engage with the industry and other policymakers (including the Department of Finance, the Bank of Canada, and other federal and provincial regulators) as the sector evolves.