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BoC Speech: Essence of the New Retail Payment Activities Act

Canadian Payments Regulation | Nov 30, 2023

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New Retail Payments Regulatory Framework

On November 28, 2023, Ron Morrow, the Executive Director – Supervision at the Bank of Canada delivered a speech about the new Retail Payments Activities Act in Canada at the Central 1 Momentum Summit in Vancouver, BC.

See:  Canada’s New Retail Payment Regulations: Registration and Compliance

  • Passed in the summer of 2021, the new Retail Payment Activities Act in Canada is a major shift in the supervision of retail payments, expanding the oversight of the Bank of Canada to include a broader range of Payment Service Providers (PSPs), many of which were previously not subject to supervision beyond anti-money laundering regulations. The Bank of Canada is focused on managing risks associated with payment activities. The robustness of national payment systems and rigorous supervisory roles of central banks have increased, especially after events like the Herstatt Bank failure in 1974 and the 2008-09 financial crisis.

Registration and Compliance

Under the new regime, PSPs are required to register with the Bank of Canada and comply with minimum standards for managing operational risks and safeguarding end-user funds. This includes separating end-user funds from operating funds and ensuring their protection through trust, insurance, or guarantees.

Scope and Impact

The Act covers approximately 2,500 providers, both in Canada and internationally, including payment processors, digital wallets, and other payment technology companies. The focus is on the functions performed by these entities rather than their business identity.

Global Alignment

In developing this framework, the Bank of Canada aligned its approach with international standards, drawing insights from similar regulatory regimes in the UK, EU, and Singapore. This global perspective ensures that Canada's approach is in harmony with the best practices worldwide.

Enforcement and Flexibility

The Bank will use various tools for enforcement, including warning letters, public notices of violation, and monetary penalties, with a graduated approach depending on the circumstances. The regime acknowledges the diversity of business models among PSPs and aims for a common standard with enough flexibility to apply across all types of providers.

See:  BoC Update on The Digital Canadian Dollar Initiative

For the complete details, you can visit the Bank of Canada's website. The information provided here is based on the first part of the speech, and the remaining part of the speech might contain additional details.

Read the full speech ==> here

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