Risks arising from digital innovations in the Canadian financial industry

Digital innovations in the finance industry, such as crypto-assets and services, may present opportunities for financial institutions, but they could also result in significant risks to the Canadian financial system. We're working to better understand this space through research, monitoring and public engagements. 

The financial sector is evolving

We’re examining this evolution on many fronts and identifying new risks to Canadians or the Canadian financial system.


We're advancing work on two fundamental areas of the crypto-asset ecosystem: 

  • fiat-referenced crypto-asset (also known as stablecoin) arrangements 
  • crypto-asset custodial services

Potential risks posed by crypto-assets

Crypto-assets are issued, exchanged, stored and transacted through the use of novel technology that can be vulnerable to risks, such as cyber, human errors, or bad actors. For instance, if the private key to a digital wallet is lost, the owner of the crypto-assets will never be able to access these funds again.

Central bank digital currency

The Bank of Canada is exploring the viability of issuing a central bank digital currency. This is a digital form of the Canadian dollar which could provide a secure and reliable means of digital payment and remittance. To support this work, we’re examining the potential impacts of a Canadian central bank digital currency on federally regulated financial institutions and the payments ecosystem.

Open banking

Open banking allows people to tell their bank to securely share some financial data with financial technology (fintech) companies or other financial service providers. We were part of open banking implementation discussions led by the Department of Finance.

Potential risks posed by open banking

Potential risks from open banking implementation may include:

  • Operational risks
  • Information security data risk and consumer protection
  • Technology and cyber risks
  • Privacy 
  • Liability

Quantum computing

Quantum computing is an emerging technology that could potentially solve complex problems faster than regular computers. We’re exploring potential risks arising from this technology.

Potential risks posed by quantum computing

The most significant potential risk from quantum computing is its potential for breaking commonly used encryption algorithms. This could result in accessing customers’ passwords, emails or other encrypted information.

Although a sufficiently advanced quantum computer isn’t known to currently exist, institutions may still be susceptible to a “store now, decrypt later” attack. In this scenario, the data would be stored until more powerful quantum computers can decrypt it.

Artificial intelligence 

This technology autonomously or partly autonomously processes data through machine learning algorithms or other techniques to: 

  • generate content
  • make recommendations 
  • make predictions

We’re exploring potential risks arising from this technology.

Potential risks posed by artificial intelligence

Potential risks to institutions that adopt artificial intelligence (AI) technology may include: 

  • Model risk, due to explainability of complex AI programs
  • Data management and governance challenges due to the volume and velocity of data
  • Reputational risks if the institution doesn’t adequately account for ethics and fairness in implementing AI systems

How we’re addressing these risks

We’re leading work on digital innovation, along with participating in other Canadian and international initiatives, to address risks in the Canadian and global financial sectors. For additional information on the following initiatives, please see OSFI's Proposed Short and Medium Term Roadmap for an Evolving Digital Landscape. This roadmap is aligned with our Annual Risk Outlook

Examples of digital innovation work led by OSFI

We’re eager to help Canadian financial institutions navigate the new digital landscape through developing effective guidance and innovative tools.


OSFI’s digital innovation sandbox 

This will be a controlled testing environment where both OSFI and our stakeholders can assess innovative activities, products, and services. It will allow us to understand and evaluate potential risks and implications with real-world impact. The design of the sandbox is in early stages of development.

Financial Industry Forum on Artificial Intelligence Report

We partnered with the Global Risk Institute to bring together AI thought leaders in a forum to discuss safeguards and risk management in the use of AI at financial institutions. This culminated into a report, A Canadian Perspective on Responsible AI , released on April 17, 2023.

Increased industry engagement

Increasing our awareness of industry developments through more engagement with our financial sector stakeholders and partners will help: 

  • strengthen our knowledge
  • identify risks and trends in the digital innovation space 

Two ways by which we’re doing this include:

  • Digital Innovation Open Door: Aims to start a dialogue with financial sector stakeholders and partners about digital innovation topics  
  • Digital Innovation Summit: Aims to generate regulatory discussions about digital innovation topics within the financial sector (anticipated for Fall 2024).

Examples of digital innovation work happening in Canada

We’re happy to work with our partners, such as the Financial Consumer Agency of Canada and the Canada Deposit Insurance Corporation, to help guide the Canadian financial industry with regards to digital innovation.

Examples of digital innovation work happening internationally

We take part in several international forum initiatives that propose responses to the risks posed by digital innovations world-wide, such as: