The Canadian government’s new 2023 budget plan involves federal regulation of the crypto industry, and new guidelines for federally regulated pension funds to disclose their crypto assets exposure to the Office of the Superintendent of Financial Institutions (OSFI). This is all part of the government’s efforts to protect Canadians and their retirement savings from the volatile and risky nature of crypto assets.
Canada’s crypto industry has been receiving increasing attention, particularly due to a series of bankruptcy cases, such as the FTX exchange and the recent collapses of crypto friendly US lenders Silveragate Bank and Signature Bank. Canadian pension funds have also been affected – Caisse de Depot et Placement du Quebec for example, wrote off a US$150 million bet on Celsius Network in 2020, and the large Ontario Teachers’ Pension Plan also suffered a US$95 million loss on the FTX exchange.
This has pushed the government to take action and introduce regulations to protect Canadians and their retirement savings, with the 2023 budget intending to address the widespread consumer protection gaps and risks to the financial system. It calls for OSFI to consult with federally regulated financial institutions to come up with guidelines for publicly disclosing their exposure to crypto assets.
The government is not alone in regulating the crypto industry. Regulators in the US, including the Securities and Exchange Commission, the North American Securities Administrators Association and the Financial Industry Regulatory Authority, have warned investors of the risks of investing in cryptocurrency. Meanwhile, even globally, G-7 countries like the UK and Canada have increased their efforts to police the industry in the wake of last year’s crashes.
Under the purview of Canada’s umbrella markets regulator, the Canadian Securities Administrators (CSA), they are also in the process of tightening requirements for cryptocurrency exchanges operating in the country. This could affect large global exchanges like Binance Canada and Coinbase, which operate in the country and are potentially subject to CSA’s oversight.
The combined regulatory efforts in Canada present an ever-evolving landscape, and it is difficult to predict the full impact of the new regulations and guidelines on the industry. It is, however, clear that the Canadian government’s intention is to protect pension funds from the volatility of the crypto market, and to ensure that Canadian investors are aware of their pension plans’ potential exposure to cryptos. As major global economies such as the US weigh up their own regulatory decisions, the direction of the crypto industry will become increasingly clearer.
