Ottawa just moved oversight of open banking to the Bank of Canada

Ottawa is shifting oversight of open banking from a little-known federal financial consumer watchdog to the Bank of Canada. 

The move, unveiled in Tuesday’s federal budget document, consolidates oversight of a variety of initiatives meant to modernize the financial sector and increase competition under the central bank. The central bank already supervises a new regime for payment technology firms and oversees Payments Canada’s development of the Real-Time Rail, a forthcoming instant payments system.

Putting them all under one institution’s mandate will streamline the accreditation process to participate in open banking, which will require financial-services businesses to share data at a customer’s request to power payments and services. For example, businesses will only have to undergo one national security review in order to access both open banking and the Real-Time Rail.

It’s also another example of upheaval on Canada’s path to open banking, which has faced repeated delays since Ottawa started the process seven years ago. The federal government announced it was putting the Financial Consumer Agency of Canada (FCAC) in charge of open banking in its 2024 budget, but did not provide details on why it’s now changing course.

As recently as June, FCAC commissioner Shereen Benzvy Miller said the regulator was working with the Department of Finance to create rules about consumer protection, privacy, security and accreditation. Switching oversight to the Bank of Canada will likely delay that work.

Abraham Tachjian, head of regulatory affairs at the fintech Brim Financial and the Canadian government’s former open banking czar, said governance of open banking has always been a contentious issue: “It was one of the things that we could never get any consensus on.” He said the central bank is a logical choice, given the similarities between open banking and the other payment modernization projects it has jurisdiction over.

Despite the setback, Ottawa continues to maintain it will launch the first phase of open banking by 2026, announcing in the budget it also intends to let consumers authorize third parties to pay bills, switch accounts and take other actions on their behalf by mid-2027. The federal Liberals also said in the budget that they intend to introduce the final legislation necessary to put open banking into practice, but didn’t provide a timeline.

Established financial players and fintechs alike urged Ottawa to provide clarity on the timeline for launching open banking in submissions in advance of the budget. The Financial Data and Technology Association said it wanted to see the government “putting a stake in the ground and committing to a timeline,” while Visa Canada said it had hoped to see specific details on the final set of legislation.

Michelle Beyo, president of the open banking advocacy group Open Finance Network Canada, said she was thrilled to see the government commit to a timeline for letting third parties use open banking to take actions on behalf of a customer. “Thank God there’s a date,” she said.

The government also announced plans to enshrine data mobility rights—a consumer’s right to request a copy of their personal data or move it to another institution—in federal privacy legislation. In the U.S., banks, fintechs and regulators have been embroiled in a messy legal battle over how to interpret a similar right granted by open banking legislation from the U.S. Consumer Financial Protection Bureau. Canadian banks have made massive investments in artificial intelligence, with the potential payout hinging on their ability to control and monetize valuable financial data.

The budget also puts another high-profile file under the Bank of Canada’s oversight: stablecoins, or crypto assets pegged to the dollar. The government will introduce a set of legislation governing their issuance. Stablecoin use for everyday payments has exploded in popularity since the U.S. introduced its own legislation regulating them in July.

For years, the crypto industry has lobbied the government to regulate stablecoins as payment instruments rather than securities, which come with strict rules that make it impractical to use them for everyday transactions. The new legislation won’t settle that question—issuers will still have to work with both the federal government and provincial securities regulators to determine which framework they fall under. However, it will pave the way for banks and other businesses to issue them and require them to meet certain standards, such as holding assets in reserve to back them on a one-to-one basis.

Ottawa is also banning banks from charging customers fees to transfer their investment accounts from one institution to another, a move fintechs Wealthsimple and Questrade have lobbied for. The budget also introduces measures intended to help smaller financial institutions compete with Canada’s Big Six, including making it easier for credit unions to merge and for small banks to grow without having to change their ownership structure.

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