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Compliance Issues in Cryptocurrency Emerge in Canada: Regulators Issue Statement

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A recent statement issued by several federal agencies in Canada has highlighted concerns over compliance issues in cryptocurrency-related activities and services in the country. The Office of the Superintendent of Financial Institutions (OSFI), Financial Consumer Agency of Canada (FCAC), and Canada Deposit Insurance Corporation (CDIC) have been monitoring the risks posed by crypto-asset activities and services, citing potential threats to consumer protection, financial stability, and security.

Regulatory Requirements for Federally Regulated Entities

The statement emphasizes that federally regulated entities must adhere to all applicable current regulatory requirements and guidance when engaging in crypto-related services or activities. The agencies emphasize the importance of prudent oversight and regulatory approaches to digital assets such as cryptocurrencies and stablecoin arrangements, which require thoughtful consideration given their potential impact on both mainstream financial systems and innovative technologies.

Compliance Expectations for Regulated Entities

Regulated entities are expected to:

  • Clearly understand the risks associated with planned crypto-asset activities
  • Ensure that these risks have been properly addressed
  • Comply with existing federal financial laws, including:
    • Bank Act
    • Insurance Companies Act
    • Trust and Loan Companies Act
    • Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Digital Innovation Roadmap and Market Conduct Obligations

OSFI has published its Digital Innovation Roadmap to provide clarity on its digital priorities in an evolving digital finance ecosystem. FCAC expects regulated entities planning to develop or offer crypto-assets to notify the agency and provide requested information to assess market conduct obligations.

Deposit Insurance Protection

CDIC reinforces that clear, accurate, and accessible disclosure about deposit insurance protection is critical for consumers to make informed financial decisions. The agency reminds member institutions of their responsibility to ensure neither they nor their business partners provide false or misleading information regarding deposit insurance protection or CDIC membership.

Ongoing Monitoring and Engagement with Industry Stakeholders

The agencies will continue to closely monitor the risks posed by crypto-asset activities and engage with industry stakeholders, including:

  • Department of Finance
  • Bank of Canada
  • Other federal and provincial regulators

as this sector evolves.