Canada’s OSFI sets new crypto risk guidelines for banks as adoption surges

Canada’s banking watchdog has released new principles designed to guide banks in managing their exposure to cryptocurrency, which acknowledges the increasing adoption of digital assets. 

The Office of the Superintendent of Financial Institutions (OSFI) announced the final rules Thursday as part of its quarterly update. The regulator has also opened a consultation on capital adequacy requirements, as a new U.S. administration is expected to liberalize financial regulations.

OSFI adopts crypto risk measures as its adoption grows

OSFI has scrutinized how banks assess crypto-related risk, especially as Canadians increasingly own cryptocurrencies like Bitcoin and use trading platforms. 

The new framework mandates lenders to evaluate their own crypto holdings and customers’ exposure to digital assets. While OSFI currently assesses the risk to Canada’s financial system as low, crypto activity is growing rapidly, said Angie Radiskovic, OSFI’s Assistant Superintendent and Chief Strategy and Risk Officer.

According to a Bank of Canada report published in December, Bitcoin ownership saw a dramatic increase in 2021 compared to 2018. The figure went from 5% in 2018 to 13% in 2021, with most of the rise coming from men.

OSFI’s new guidelines effectively create a two-tiered system to assess the effect of exposure to crypto on banks’ capital and liquidity, both of which are critical for ensuring the financial system remains stable in a recession. 

The framework stipulates that banks with minimal exposure must deduct the totality of their crypto-asset holdings from their common equity tier 1 (CET1) capital (a common measure of capital available to absorb losses), ensuring sufficient capital buffers are retained. In the meantime, banks with larger exposures must classify their digital assets according to their level of risk, applying different capital requirements on a case-by-case basis.

Canadian banks hold minimal crypto assets

Amar Munipalle, OSFI’s executive director of the Risk Advisory Hub, said in the statement that the vast majority of Canadian banks have little to no direct or indirect exposure to cryptocurrencies. 

Most banks are involved only in facilitating transactions related to their clients’ crypto activities, not in maintaining large amounts of digital assets on their own books, Munipalle said.

The new rules come into effect in early 2026, and OSFI said it is considering making public regulatory data on banks’ exposure to crypto-assets.

In addition to its crypto rules, OSFI has opened a consultation on capital adequacy requirements—the minimum amount of capital banks must hold in case of losses on their loan and investment portfolios. 

Without sufficient capital reserves in the banks, this could destabilize the economy, as evidenced by the global financial crisis of 2008. 

OSFI last week halted planned increases in capital levels introduced under the Basel III framework that aimed to bolster global financial stability. The proactive introduction of such safeguards in Canada has divided opinion, with detractors arguing that it places the country’s banks at a disadvantage in relation to international peers.

U.S. President Donald Trump’s expected repeal of financial regulations has also swayed OSFI to postpone capital hikes.

“When we see better alignment among the major jurisdictions on how to implement the regulation, and once we have a complete picture of the impact on our banks — many of which are global players — we expect to revisit our transition plans,” Munipalle said. 

These regulatory changes highlight Canada’s pursuit of maintaining financial stability while keeping pace with the fast-paced development of the digital asset space.

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