Canadian financial regulators recently revealed their capital plans for banks and insurers dealing with crypto assets, drawing inspiration from the suggestions of the Basel Committee on Banking Supervision last December. The announcement, implemented by the Office of the Superintendent of Financial Institutions, could pave the way for a more harmonious relationship between the traditional financial sector and blockchain innovations.
Peter Routledge, Superintendent of Financial Institutions, noted the need for deposit-taking institutions and insurance providers to understand how crypto assets would affect their capital and liquidity. Routledge announced open consultations until September 20th, to provide these institutions with the required clarity.
The capital plans issued provide banks with two choices: a meticulous formula that differentiates crypto assets based on estimated risk, or an uncomplicated, yet less discerning option. This flexibility adds a layer of versatility to the whole equation, catering to different risk appetites and strategies pursued by financial institutions.
However, one could argue that the comprehensive risk-based choice, although more complicated, offers a better representation of the risk involved in holding certain types of crypto assets like BTC or ETH. Conversely, a more straightforward option could potentially discourage due diligence and thorough risk assessment.
During December, international standard-setters proposed treating non-backed cryptocurrencies like the riskiest kind of assets for banks to hold. As a result, limitations on the amount of crypto assets like BTC or ETH that lenders could hold were suggested. Regulatory bodies like the European Union have already begun legislating these changes.
These revelations beg the question: while these guidelines could authorise more institutions to dabble in cryptocurrencies and contribute positively to the industry, could they potentially halt the decentralised nature of blockchain technology and cryptocurrencies?
Regardless, these capital plans, once implemented, could alter the crypto-landscape, attracting more traditional financial institutions towards crypto-asset investments while maintaining financial stability. Moreover, it also signifies the international community’s growing acceptance for blockchain innovations and cryptocurrencies, recognising these as legitimate financial assets. The consultation period will certainly be a hotbed of discussion and dissection as the finance sector navigates the fast-paced world of blockchain innovations.
Source: Coindesk
