In the new 2023 Canadian budget plan, the national government targets pension funds’ exposure to crypto assets. In recent times, Canada has intended to tighten their authority over cryptocurrencies.
During the budget session, Canada’s national government said federally regulated pension funds in the country will need to disclose their crypto assets exposure to the Office of the Superintendent of Financial Institutions (OSFI).
The Office of the Superintendent of Financial Institutions is an independent agency of the Government of Canada reporting to the Minister of Finance created to contribute to public confidence in the Canadian financial system.
While unveiling the new plan under the new budget, the Canadian government counted on the move to protect retirement funds. It said:
To help protect Canadians’ retirements, Budget 2023 announces that the government will require federally regulated pension funds to disclose their crypto-asset exposures to OSFI.”
Additionally, the budget plan stated that the federal government will work in collaboration with provinces and territories to discuss crypto-asset or related activities disclosures by the country’s largest pension plans, which would ensure Canadians are aware of their pension plan’s potential exposure to crypto assets.
Additionally, the OSFI will consult federally regulated financial institutions on guidelines for publicly disclosing their exposure to crypto-assets, to help protect “Canadians’ savings and the security of our financial sector.”
To protect Canadians from the risks that come with crypto-assets, there is a clear need for different orders of government to take an active role in addressing consumer protection gaps and risks to our financial system.”
While the Canadian government wants to tighten its regulatory oversight on the volatile industry, the recent move is being seen as an outcome of the high-profile bankruptcies that the industry has gone through in the last six months.
These bankruptcies include the collapse of the crypto exchange FTX, the crypto-friendly US lenders Silvergate Bank, and Signature Bank, and the shockwaves triggered in the industry by the Silicon Valley Bank. All of these instances highlighted the extremely volatile nature of the crypto assets that the investors have to bear with.
Sources reveal that some Canadian pension funds have already felt the burn of investing in crypto. Last year, Caisse de Dépôt et Placement du Québec, a pension fund based in Quebec City, said that it wrote off a US$150 million bet on Celsius Network.
Similarly, the Ontario Teachers’ Pension Plan, one of the largest pension funds in Canada, with nearly US$250 billion in assets under management (AUM), also said it would write down the entirety of its US$95 million investment in FTX.
It is important to note that Canada is not the only nation that is reluctant over the inclusion of crypto assets in regard to pension schemes. Last year, Fidelity, one of the biggest asset managers in the world, allowed its employees to deposit Bitcoin into their 401(k)s (retirement accounts) at Fidelity Investments, the leading provider of retirement plans in the US.
To this, Democratic Senators expressed dissatisfaction with Fidelity’s Bitcoin retirement plans. They also urged the CEO Abigail Johnson to “reconsider its decision to allow 401(k) plan sponsors to expose participants to Bitcoin.” In June, Janet Yellen, the Secretary of the United States Treasury shared her opinion on crypto in 401(k) plans. She said that it is not recommended to include crypto in a 401(k) retirement plan and opined that it is a risky investment.