OSFI’s Proposed Short-and-Medium Term Roadmap for an Evolving Digital Landscape

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  • Type of publication: Public consultation
  • Date: November 16, 2022

OSFI is publishing this page to inform regulated and non-regulated institutions of its planned work on areas of digital innovation, and to consult on specific areas of that work.

Digital innovation roadmap

Background

OSFI recently published its Annual Risk Outlook, which highlights OSFI’s strategic objectives for this fiscal year, including the release of its Interim arrangements for the regulatory capital and liquidity treatment of crypto-asset exposures in August 2022, an important step in clarifying the interim regulatory capital and liquidity treatment of Deposit Taking Institutions’ (DTIs) and Insurers’ exposures to crypto-assets. OSFI remains committed to addressing emerging risks and assessing emerging technologies. This roadmap outlines OSFI’s planned work in this space, in line with the jointly published statement to regulated entities engaging in Crypto-Asset Activities.

Proposed roadmap

OSFI is engaged in international work, including the Basel Committee on Banking Supervision’s consultation on prudential treatment for bank exposures to crypto assets, the Financial Stability Board’s consultations related to Global Stablecoin and Crypto Asset Guidelines, and the International Association of Insurance Supervisors (IAIS) 2022-2023 Roadmap, including the upcoming publication of their FinTech note.

OSFI plans to influence and leverage the outcomes of the work of these international bodies as a starting point for setting OSFI’s expectations. We will also leverage lessons learned from international body fora, such as the IAIS Fintech Forum. In this new and emerging digital space, OSFI is concurrently working with other Canadian regulatory agencies on creating the policy landscape.

To date, OSFI has recognized the importance of this evolving digital space. Through OSFI’s Blueprint for Transformation 2022-2025, OSFI has created the Digital Innovation Impact Hub, focused on developing OSFI’s approaches to the regulation of digital technologies in the financial space with a current workplan focused on four key pillars:

  • Advancing policy work;
  • Creating a digital innovation sandbox;
  • Developing supervisory practices and tools; and,
  • Furthering stakeholder engagement.

Over the next 24 months, OSFI has planned multiple projects to provide additional clarity on areas of risk management and governance pertaining to digital assets, and will approach this work in an evergreen manner. OSFI remains committed to updating its approach as needed to reflect ongoing developments, particularly in line with the Department of Finance legislative review focused on the digitalization of money.

Digital innovation roadmap. A text description follows
Graphic Description - Digital Innovation Roadmap
2022
  • Office of the Superintendent of Financial Institutions
    • Publish interim arrangements for the regulatory capital and liquidity treatment of crypto-asset exposures.
  • Government of Canada
    • Finance Canada: Stakeholder engagement on fiat-referenced crypto-assets (formerly referred to as stablecoins) and CBDC.
  • International
    • Financial Stability Board: Consultation on fiat-referenced crypto-assets* & crypto-assets.
    • Basel Committee on Banking Supervision: Consultation on crypto-assets.
    • International Association of Insurance Supervisors: Publication of FinTech note.
2023
  • Office of the Superintendent of Financial Institutions
    • Engaging on risk management expectations, for digital assets, including fiat-referenced crypto-assets*.
    • Engaging on the digital innovation sandbox.
    • Finalize risk management expectations, for digital assets, including fiat-referenced crypto-assets*.
  • International
    • Financial Stability Board: Updated recommendations on crypto-assets and fiat-referenced crypto-assets*.
    • International Association of Insurance Supervisors: 2023-24 Roadmap; IAIS Fintech Forum.
2024 & Beyond
  • Office of the Superintendent of Financial Institutions
    • Launch the digital innovation sandbox
    • Explore:
      1. Crypto asset custody, lending, issuance, staking, derivatives, decentralized finance.
      2. Payment innovation, Advanced AI/ML.
      3. Other subjects, such as Quantum computing.

*Formerly referred to as stablecoins.   

Specifically, work being conducted as part of our four key pillars includes:

  • Policy:
    • Fiat-referenced crypto-asset (formerly known as stablecoin) arrangements: OSFI is working with domestic and international partners to consider approaches to the prudential regulation of fiat-referenced crypto-asset arrangements.
    • Risk management clarifications: OSFI plans on providing additional clarity and / or consult on areas of risk management and governance for:
      • Digital assets in Canada for DTIs following a phased approach:
        • Fiat-referenced crypto-asset arrangements; and,
        • Other related activities, including digital asset custody, crypto lending, crypto staking, other DeFi applications, as warranted.
      • Other technologies (e.g., Payment Innovation, Open Banking, Advanced Artificial Intelligence & Machine Learning, Quantum, and others).
  • OSFI’s Digital Innovation Sandbox: OSFI will work closely with partners in the emerging area of digital finance to create a digital innovation sandbox for OSFI and industry to better understand new technologies and digital activities in a controlled environment that enables innovation. This process will help industry to better assess the feasibility of their innovations, all while supporting OSFI’s development of policy approaches in the digital finance space.
  • Supervisory: The Supervisory pillar will support OSFI’s supervisors in ensuring they are prepared for the digital future. OSFI plans to engage with other regulators within Canada and internationally, to provide ongoing, timely guidance as required. OSFI will continue to monitor trends, emerging risks, and emerging technologies as they relate to the financial sector to better understand implications of those risks to our federally regulated financial institutions (FRFI).
  • Stakeholder Engagement: Collaboratively with other federal regulatory bodies, OSFI will engage key stakeholders on a regular basis, for the purposes of collaboration, information sharing, participation in the digital innovation sandbox, and ongoing business.

Much of OSFI’s work will be collaborative with other federal and provincial regulatory agencies, with international bodies, and with foreign governments. OSFI expects further work in this space pending the results of the Government of Canada’s financial sector legislative review.

Request for feedback

OSFI is seeking voluntary feedback from regulated and non-regulated entities on the following questions:

  1. In addition to providing additional clarity on areas of risk management and governance that are specific to fiat-referenced crypto-asset arrangements and crypto-asset custody, are there any other priority areas or digital innovation topics you would suggest OSFI to focus on, in the short and medium term?
  2. OSFI is preparing to launch a digital innovation ​sandbox to enable experimentation of new technologies in a safe environment.
    1. Would your organization have an interest in learning more or participating in the sandbox?
    2. If your organization has an interest in participation, please indicate for which type of products or services.

Feedback on the above questions should be sent to OSFI by email at digitalinnovationhub@osfi-bsif.gc.ca by January 19, 2023. However, this roadmap will continue to evolve, and will be an evergreen document. While we would appreciate your feedback as soon as possible, we would welcome whatever input you have, at any time.

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