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Canada's federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), has announced a significant modernization of its new entrant approval process. The proposed Targeted Fast-Track Framework for New Entrants scheduled to launch in June 2026 signals a meaningful shift in how Canada evaluates prospective federally regulated financial institutions (FRFIs). One early priority for OSFI is applications by businesses with innovative banking models, such as fintechs and crypto-asset custodians.
For prospective applicants, this initiative represents more than a change in procedure. It reflects a deliberate policy evolution: a more transparent, more predictable, and more risk-calibrated pathway into the federal system, without compromising the safety and soundness of Canada's financial sector. The path for fintechs to unlock national scale and enhanced business offerings is becoming clearer.
Opportunities for innovators
Fintechs considering this new framework should carefully weigh the potential advantages and disadvantages of becoming a federally regulated financial institution. Federally regulated status offers a number of potential benefits, including immediate national scale, enhanced credibility and customer trust, and the ability to offer a broader suite of products and services that are limited to regulated financial institutions, such as deposit-taking. It may also provide direct access to Canada's full payments infrastructure, improve unit economics relative to partnership models with sponsor institutions, and create opportunities for more stable, lower-cost funding.
These advantages must be balanced against significantly increased regulatory expectations, including capital and liquidity requirements, enhanced governance standards, ongoing supervisory oversight, and higher overall compliance costs. However, this pathway may be particularly attractive for large-scale digital lenders, neo-banks seeking to offer deposit products, payments businesses looking for broader access to payment rails, and more mature fintechs focused on long-term credibility, profitability, and national scale.
While OSFI's updated new entrant framework is separate from OSFI's crypto-asset exposure guidelines, it is simultaneously occurring alongside evolving crypto prudential guidance. As of this year, regulated institutions are permitted to hold stablecoins, tokenized financial assets and exposure to certain crypto assets (like Bitcoin) including up to 5% of Tier 1 capital under OSFI supervision. As a result, digital asset custodians that may become federally regulated trust companies should be able to meaningfully engage with other FRFIs, which could make newly chartered custodians more attractive to institutional clients who want regulated onshore digital asset custody under a clear prudential regime.
A modernized approach to entry without lowering standards
OSFI has emphasized that the new framework is not about "speed for speed's sake." Rather, it is about right-sizing reviews, focusing on material prudential risks, and reducing unnecessary cycles and ambiguity.
Historically, new entry processes, particularly for banking licenses, have been rigorous and, at times, lengthy. Applications could extend over several years, due in part to iterative information requests, evolving expectations, and dependencies outside OSFI's control, including integrity and security reviews and ministerial review timelines. While those dependencies outside of OSFI remain, OSFI is looking to streamline its part in the process.
Under the fast-track framework, OSFI is committing to:
- Clearer expectations up front, reducing uncertainty about what "good" looks like;
- More structured, efficient, risk-based reviews by OSFI;
- Greater transparency regarding application status and decision points;
- Explicit use of approval conditions and restrictions to manage residual risks post-approval; and
- Defined target timelines, where dependencies permit.
Importantly, OSFI has been explicit that prudential standards are not being lowered. The application requirements and supervisory framework are not becoming more relaxed. The change is in OSFI's process and approach, not in its safety and soundness expectations. For potential applicants, the bar for approvals remains high but the pathway is becoming clearer.
How fast is fast?
Under OSFI's proposed fast-track framework, the revised timelines are structured across three defined phases:
- Initial Readiness Assessment: OSFI commits to providing feedback within 4 weeks of engagement with the applicant at the pre-application stage;
- Formal Application Review: once a complete application is accepted, OSFI is targeting up to 12 months to deliver the Superintendent's recommendation to the Minister, subject to external dependencies; and
- Operational Readiness: following Ministerial approval, OSFI is aiming to issue the Order to Commence and Carry on Business within 3 months, or aligned with the "go-live" plans of the new entrant.
Taken together, for well-prepared applicants, this framework signals a pathway from readiness to operational launch that could theoretically run in under 18 months. This represents a significant compression compared to historical multi-year timelines that in some cases have taken 5 to 6 years to complete. However, the dependencies outside of OSFI, including the completeness of the application, results of security checks and Ministerial review timing, remain important variables that will affect the overall time to obtain approval.
OSFI is proposing increased reliance on conditions or restrictions on the approval where appropriate, rather than requiring perfection at the outset. These conditions or restrictions may be lifted post-approval as risks are addressed and re-assessed.
Risk-calibrated innovation and transparency
OSFI has been clear that established institutions and new entrants remain subject to the same supervisory framework. This new approval framework marks a shift toward better calibration, focusing effort on material risks and deploying guardrails where necessary. OSFI is signaling that responsible innovation is welcome, but it must be supported by robust governance, capital, risk management, and integrity controls.
OSFI has also proposed introducing a public-facing dashboard (with applicant consent) to provide public visibility into the applicants, the nature of the application and the application's status. This step would significantly enhance transparency for stakeholders and the public for a process that occurs now almost entirely out of public view.
Looking ahead
The Targeted Fast-Track Framework is scheduled to launch in June 2026, with an initial implementation period of at least 12 months. OSFI expects to release a dedicated landing page on its website for the framework in the coming months and to update existing application guidance following.
Canada's prudential regulator is signaling that it is prepared to support innovation, provided that applicants are prudent, well governed, and managing risk appropriately. For prospective applicants, preparation will be key. Those who plan ahead will be best positioned to benefit from a process that is becoming faster, clearer, and more strategically aligned with innovation.
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