FSxT Connect Regulatory Pulse Igniting Innovation

PARNA SABET-STEPHENSON: Good morning and thank you for joining us today. I'm Parna Sabet-Stephenson, the leader of the FSxT team at Gowlings. And it is my pleasure to welcome you to FSxT Disconnect Regulatory Pulse, which is really a gathering discussing topics at the nexus of technology, finance, and regulation.

Today's agenda is both timely and dynamic as we're at a moment of transformation for Canada's financial services sector. And today's theme is igniting innovation. As we all know, innovation in financial services doesn't really happen in a vacuum. It happens in a regulatory environment. And we're honored to be joined today by senior leaders from FSRA, Payments Canada, and the Bank of Canada.

Our first chat this morning is with Jude Pinto, chief delivery officer at Payments Canada, the organization responsible for operating Canada's national payment system and leading to modernization of the country's payments infrastructure. Jude will be in conversation with my partner Alana Scotchmer, an expert in financial services regulation and payments. Over to you, Alana.

ALANA SCOTCHMER: Thank you so much, Parna. And thank you very much, Jude, for joining us today and to all of you. So let's launch right into it. I think we have a lot to talk about. So it has been a very big year in the world of payments. I think that maybe is a big understatement. Notably, we've had the RPAA regulatory regime going fully live and in force on September 8, 2025.

So we now have registered PSP's. We have a fully activated regulator in the Bank of Canada. I think we're checking in with Ron Morrow a little bit later today. But there was also recently another very important piece of legislation, which was amended, which is the Canadian Payments Act, which is the constituting legislation of payments Canada, among other things. Can you tell us about what changed and what that means for Canadians?

JUDE PINTO: Thanks so much, first of all, for having me here. It's wonderful today. Lots of old friends here in the audience. And you're right, the combination of CP Act amendments, CPA Act amendments, as well as RPA, as well as what that means to our shifts in our membership criteria and ultimately right now, our participation criteria, they all hang together.

So starting with the CP Act. That basically broadens the potential for membership to credit union locals, certain clearinghouses, as well as designated PSP's under RPAA. And that is consistent with two things. One, the fact that the credit union ecosystem is an important part of the country, and we need it to be able to stitch together opportunities for participation in these largely provincially regulated, prudentially provincially regulated entities.

The clearinghouses are part of the national ecosystem. And so it made sense to make sure those ties are maintained. But the PSP's unlock innovation. So the notion of PSP's under RPAA is, first of all to say, well, if you're an entity of this type processing payments, we all know the RPAA requirements, then you should register as an RPAA approved participant.

And what we see around the world is that a number of the PSP's exist to fill market gaps and filling market gaps is the essence of innovation. It's basically what might be too niche for a big bank to do, or something that's truly compelling that a big bank eventually wants to buy or partner with. And a lot of that is enabled when there is ability to participate, either directly or through a service partner into things like RTR.

So we do feel that this is the key to unlocking innovation. It also will unlock innovation in the incumbent participants as a big part of it as well. Just because those market gaps force a choice to be made. Does the institution want to play in that space with growing competition, growing offers, et cetera?

So that's what CP Act amendment that allows these to register, plus RPAA in combination, do for us. It creates this opportunity for innovation. One other thing I'll put in there is because it's under a regulatory regime, and that regulatory regime will help us enforce key risk practices and safety practices for the country, it's a safe pathway to innovation.

ALANA SCOTCHMER: That's fantastic. Thanks, Jude. So we will get into those requirements in a moment. But first, the question that I think you probably get asked a lot and that many in the room may be curious to know about. So what is the status of the RTR? I know it's a multiyear, massive project. What's the status right now, and what's the timing for launch?

JUDE PINTO: Sure. Let me just touch on the scope of the program. So we already talked about one, which is the regulatory change and the rules of the practices. A second piece of it is developing a common clearing and settlement application for the country. That clearing and settlement application is an RTGS system that two big things, new participants coming through RTR exchange direct or e-transfer will actually flow through.

So what we have to do is build a CNS, build a pathway by which e-transfer will flow through that CNS for its clearing and settlement mechanism so that's a conversion project. And make sure that RTR exchange has been built as well, so that those that aren't e-transfer can come into the system directly. The program restarted with a slightly different architecture and an approach just last April.

So April 1 is the program that we've been thinking of. And we spent most of the year, in 2024, elaborating requirements and getting to detailed solution design on how RTR exchange, e-transfer conversion of its settlement mechanism and CNS would be built. That concluded in the October, November time frame, with one exception or two exceptions.

There had to be some more work done on the participant actor's model, as there's various regulation was unfolding. We had to have a solution for fraud. So we were asked to make sure that a part of the safety was invent a solution that the best model to sit alongside all of RTR exchange and e-transfer fraud and do that build and make sure that we were considering also, for the future cross-border, [INAUDIBLE] of 16 compliance.

So all of that had to go into the design. Technical build of these applications was done in two phases successfully. The first code drop one across all of these things happened in February of 2025. Code drop 2, which was the end of the application build, happened in July. We have, let's call it a code drop 3, but it's for those last changes related to fraud, CRS, and INTL happened in October.

So that pushed us directly into the testing phase. SIT testing, that means testing how all of these components work together, started in February with code drop one. We just will finish next week SIT two. So that's basically proving that all these applications work well in the cloud. So we'll be transitioning from that to now UAT testing which is functional testing in December.

Once functional testing is done, then we're deep into performance, resilience, security testing, then industry testing, and then launch. I'd say we're deep in the testing phase. At the end of SIT, start of UAT heavy lifting to happen early in the spring on all aspects of performance, resilience, and security, and then industry. Industry is really broken up into two phases as well.

So that testing will include the participants in what we're calling wave one that are new to RTR and participants in the e-transfer conversion that will follow. So that's where we are.

ALANA SCOTCHMER: That's great. Thank you. So we're obviously really looking ahead down the road. And many PSP's we know are considering Payments Canada membership, participation in the RTR. And what I'm hearing is there's still time to get ready for launch. But I think PSP's should start thinking about this now if they haven't been already.

Can we just go through what are the requirements for membership and participation? How long does that process take? What's Payments Canada's view of that?

JUDE PINTO: Mm-hmm. Yeah, so the process is really the application completeness type of process. There is a PSP onboarding guide that you can get a lot of the details on this from our website. Step one is a check that the RPAA registration has gone through. So we're working closely with the Bank of Canada, especially those that have expressed interest in being part of wave one, where they are in that approval cycle.

Part of that approval includes coordination with FINTRAC registration. So then you've got a bank of Canada set of requirements, FINTRAC requirements, and a security set of requirements coming out of the Department of Finance. All of that then says, OK, great. If we're double checking that all of those conditions have been met and the potential participant is through those cycles, we go through membership.

Membership says you can be a Payments Canada member and are eligible to participate in any one of our systems, but it doesn't automatically get you into those systems. So that can be fairly fast because it's largely making sure that the other three sets of requirements are met. There's an amount of due diligence we'll do for our board to confirm that and get board approval.

The critical step is participation approval. So the participation approval in RTR that goes beyond membership has to be approved by the Payments Canada CEO. And that gets into business, technical, and operational requirements for the participant, which if you're a mature operations, for example, can demonstrate your internal risk framework and resiliency type of frameworks and approach to fraud and things like that, it can be fast.

If you're doing it for the first time, you need help. And maybe it's not in time to make wave one by the time those things can be matured and signed off.

ALANA SCOTCHMER: Absolutely. So I know you've mentioned the importance of the anti-fraud capability being built into the RTR for day one. Can you give us a little bit more on what that means, how that function is meant to mitigate fraud?

And then building on that idea of understanding that payments on the RTR are instantly settled, they're irrevocable, and decisions about those payments need to be made instantly, how does the RTR mitigate against AML, ATF and the likes? How those things all fit together.

JUDE PINTO: OK. Yeah, so if you think about a payment flow, the raw payment flow between RTR exchange or e-transfer and CNS and back, on average, three to five seconds and it times out after eight seconds. OK. So that's the simplest part of it that has to work at scale.

Things like checking for INTL flags and in the future, doing some sanction screening and confirming ultimate beneficiary and source, all of that has to be done before the payment initiation. So you're not going to do that within the eight seconds. So it's a pre-initiation step that, let's think of the technical workflow goes through. Fraud is the same way.

A flow through the fraud services and acceptance of fraud happens before that eight second timeout but technically, that's how it works. That means you're doing that before R-2R exchange even sees a transaction to move to the clearing and settlement and back in three second, three to five seconds on average.

The fraud service assumes that the participant may have a fraud regime in place, but that fraud regime may vary dramatically between a large participant, a medium participant, a small participant, a brand new participant. So what we wanted to do is make sure that there is value added for the existing participants, largely e-transfer folks, by raising information that goes into things like fraud, scores, et cetera to a network level.

So it's better than they can utilize today and we're introducing a few other things that I'll talk about. For new participants, you've got a base level of fraud utility that comes from the service out of the gate, as you're maturing your own internal fraud practices.

And then our rules basically allow for careful monitoring across all participants, daily, weekly, monthly, quarterly on fraud rates, and we set thresholds for indication of where to take actions, where to slow things down, where to intervene, et cetera. And that will be important in the first year. The four services that are mandatory to be used with participation day one in fraud include a risk score on your transaction.

So first, there's an algorithm that runs through a number of factors, including network heuristics around that type of transaction and gives a score back to the participant. The participants algorithms have to say at what threshold do they want to accept the risk and let the payment go through initiation into the RTR or they want to stop the payment or slow it down to do some investigation, if it's a score above a certain amount.

So that's important then for the participant's risk framework to be tuned to, how do I use a score that comes in as part of my pre-initiation step. The second thing is a risk list. So if we do find that bad actors are identified under certain criteria and we want to prevent them from moving around from institution to institution, we have a central risk list for everybody to contribute to and that too will feed the risk score.

But for police enforcement, et cetera, in coordination with FINTRAC, it becomes an important national utility that will all be building up over time using a different way. The third thing is a standard reporting. The way account to account frauds are reported today, largely self-reported, makes it questionable as to whether we have a firm grip on exactly what every participant has experienced today as well as in the future when we add more participants into the mix.

And the missing taxonomy that makes it hang together is a problem today that we hope to solve in the future by consistent standard national reporting of fraud. And the last thing is confirmation of pay. So a transaction will do a ping and say, yeah, this is the right person or likely the right person, or there's something maybe you want to check and see if this is the right person type of regime.

That will evolve over time as we think this is an important competitive space as well where we've seen around the world that more and more value adds to confirmation of payee are starting to emerge. And we fully expect more than one supplier to be in this market shortly.

ALANA SCOTCHMER: That's great. Thanks very much for that. So we've looked a little bit ahead down the road to RTR launch. What happens a little bit further down the road? Just to wrap things up here. Where does the RTR go at launch and beyond?

JUDE PINTO: Well, there's a convergence of a number of things happening. If I think about the late '26, '27, '28 frame, what's happening in the country? There is open banking that's making its way into there. There's a certain response around open banking that will require an RTR response and a coordination of fraud responses around it as well.

So I expect that to show up somewhere in our roadmaps. I won't commit to any releases, release 2, release 3, whatever, but we know that's an important dynamic happening around us. Fraud. We'll have learned, after launch, the fraud conditions. We might be thinking about what's the next best thing to do as fraud release to within there.

So open banking fraud then the global dynamic. The global dynamic is putting different pressures on what cross border corridors are going to become important for the country, who do we marry up with and what do we have to do for the good of the economy in that space. Maybe I should have done this first. But apart from those three macro factors, there is the back to the innovation point.

What are the use cases that we want to partner with PSP's, and banks, and credit unions to fill market gaps to make sure that through that innovation, the country is getting stronger from a national productivity perspective. That is the core of why we do it. The rest is about reacting to these other macro factors that will have to surround it. So those four.

ALANA SCOTCHMER: Well, we have no shortage of things to discuss always. But we wanted to thank you so much for joining us today, Jude, and sharing your insights.

JUDE PINTO: Well, thank you very much. I'll encourage you or your clients to go to the Payments Canada website, especially the PSP playbook. Our industry solution assurance phase will start in probably late spring. So those that want to get into wave one and actually be part of that testing, should get in now and get through the hurdles of membership, not hurdles, the pipeline of membership and participation approvals so they can be effective participants, late spring, early summer.

ALANA SCOTCHMER: Wonderful. Thanks so much, Jude.

JUDE PINTO: Thank you.

ALANA SCOTCHMER: Dexter John, the chief executive officer of the Financial Services Regulatory Authority of Ontario, FSRA, and my partner, Adam Garetson, who is the leader of the blockchain and digital assets group here at Gowling WLG. So please welcome Dexter and Adam.

ADAM GARETSON: Good morning. Good morning, Dexter. Thank you so much for being here today. Appreciate it.

DEXTER JOHN: Thank you. You guys hear me, right? OK, here we go.

ADAM GARETSON: Yeah, coming through loud and clear. Thank you. So you've recently stepped into your role with FSRA. It's been about seven months now, I think, since you've taken over the top job as CEO. You've inherited some things and are seeing your own priorities emerge. What is coming up for you as top priorities now as CEO?

DEXTER JOHN: Thank you for that. Thank you. Thank you. And pleasure to be here. Nice meeting you all. Yeah, no, it's been actually eight months. I was counting back there. It's like, oh, my gosh, eight.

ADAM GARETSON: You got me.

DEXTER JOHN: My fault-- seven. But I think it's fair to say FSRA's now six years old, and we are now at a new stage where the world's changing, a lot of things happening. So we look within and ask ourselves, what do we see ourselves for now and the future? And I would say we just finished our strategic framework review over the last couple of weeks.

So we'll be coming out and letting people know how we see ourselves. So you're going to get a little bit of inside knowledge right now is that the punchline or tagline will be more or less we see ourselves as a modern, agile regulator that's focusing on and delivering principle-based oversight that will ultimately foster trust amongst our stakeholders and the public.

And with all that, we still got to balance our ultimate mandate, which is consumer protection, innovation, and competition. So it's a healthy tension because at the end of the day, and I'm sure we'll talk about it further, that for us to adapt to what the world is looking like now, we're going to have to be able to understand that there's not a perfect balance of consumer protection, innovation, and competition.

We have to make a choice and lean in one way over the other to an extent.

ADAM GARETSON: Got it. Got it. Thanks. That makes sense. And thank you for the sneak preview of what's coming down the pipeline in that sense. So zooming out just a little bit and looking at the province of Ontario and the development of regulation, you're talking about being more of an agile regulatory body, how do you see regulation in the province developing over a five-year period?

DEXTER JOHN: That's a great question. And I would say-- I'm going to take a step back. Historically, people see regulators like ourselves as gatekeepers. And I think it's very clear that where we are in this world now, we need to break away from that thought process and recognize that as regulators, we need to be more collaborative.

So for example, I'm going to say Ontario, but I'm going to say slash Canada. And I'm going to say that ultimately, between ourselves, OSC, CIRO, the three major guys in Ontario, organizations in Ontario, we have to do something better to allow for investment in Canada or in Ontario. I think historically, people see us as not friendly where we say no, not yes.

And I think it's really important, at least from what I'm trying to invoke in terms of our culture at our organization, is that that's not the case. We need to be able to put ourselves in a position where we allow for investment to come in. We need to work collaboratively. We need to have investors across the world sit there and say, hey, I want to invest here in Canada or Ontario but more importantly, the so-called watch dogs are going to work with us.

Our regulation the next five to seven years is going to be really be focused on being more collaborative, being able to show external investors that here is a perfect place to invest and to also make our-- I hate to say it this way, but we need to rise again. We've fallen behind. We're well behind. And we got to catch up.

And the only way to do so is to be able to have investment in the province, have better regulation, be more open to innovation. And more importantly, I would say to-- I won't focus on the Maple Lake, but even have them to work with us in terms of investing more into mid-cap and small cap. So I think that's really important how I see regulation in the future, where we just need to be in a position where we're not seen as gatekeepers, we're seen as partners.

ADAM GARETSON: As a securities lawyer by training who's focused on financial services and innovation, I'm a huge fan of that approach. I think the yes, culture, driving innovation, partnership model, that speaks a lot to me, and I know a number of people in the room as well. And I'd just like to unpack that a little bit because you're talking about coordination and collaboration and making Ontario more attractive.

If we could just get into that a little bit from a coordination perspective. It's obviously going to take coordination with federal regulators. You mentioned other provincial regulators, provincially regulated entities. So just going maybe a level deeper, how does that actually happen? How does that sausage actually get made?

DEXTER JOHN: Yeah, no, that's a great question as well. So people don't see the background. So again, I can even speak from when I started eight months ago and how I'm operating and how I'm moving. But I would say that one of the biggest things I've started to do-- doing since I started the role was I reach out. So I have fortnightly calls with OSC. I have monthly calls with BCFSA.

CIRO and I, we go for lunch every couple of weeks. And OSC, we have conversations once a quarter. So again, the purpose of all that is to bring that alignment that's required in terms of being able to let things happen because end of the day, we have our agenda, we have our mandates but if we're not working alongside each other, or at least understanding what the issues are, so more transparency amongst the regulators.

We're not enemies of each other. We should be partners. For example, if the OSC sneezes, I shouldn't catch a cold type of thing. So we need to be able to do way more in terms of working collaboratively with our security brethren, so to speak. But that is what we're working on now. And there are a few things, I'm sure I'll talk to you about as we move along, that we're doing now that you'll hear about.

But it's really important to have that collaboration. But more importantly, we use that as power because now if we're working together, now if we have an issue or a disagreement with the minister's office, now we can have a conversation to say, hey, look, we've talked about it amongst ourselves. This is how we see it working out.

We don't necessarily agree. We have to maybe agree to disagree at the end of the day because they are the boss to an extent, but at least put forward another option for them to see. So the more we work together. And again, Ontario being the largest population in Canada and OSC and FSRA combined, we have a lot of cloud.

So we just need to start working a lot more together, more collaboratively, and being able to push agendas a little further, as opposed to just doing what's expected of us.

ADAM GARETSON: Yeah, thanks for that insight. That's really helpful. And I think the theme of collaboration definitely goes a long way from a inter-regulatory perspective. And when we think about themes that have emerged recently, from a financial services and regulatory perspective, one of the things that we hear a lot is about competition and increasing competition among regulated entities, among financial institutions, and how that can potentially drive innovation and investment in the province and things like that.

So I'm curious your perspective on the role of FSRA in fostering a more competitive landscape, really among provincially regulated players, while kind of as you were saying, balancing that consumer protection mandate at the same time.

DEXTER JOHN: Yeah. So what we are doing now-- I won't even lie when I say this to you, I didn't know we even have this until about three months ago. But we have something we call a test and learn environment, which really is for innovation. So for example, one if the regulated entities wants to try a new product and test it, we have a sandbox that can come in and they work with us.

We work with them. It's offline. We get to give them feedback on the governance and then ensuring that when it's ready to be launched to the public, it's there. They have our stamp of approval, and it works. And again, from the consumer protection perspective, they are now protected because we've already thought about all the potential issues that they may face.

Whereas in certain circumstances, regulated entities might just come out with a new product and just throw it out there, and it's rolling dice. And we just don't know what's going to happen. And I think we need to do a better job, FSRA, in letting folks know. And I can say based on the stats I received last year, we had three.

And since my joining and finding out about it three months ago and pushing it a little bit more, we now have, I think 12 in that sandbox right now, and that number is growing a lot more applications. So it's really important, again, to show that we are trying to allow innovation, which will then allow for competition. And

Then ultimately, the consumers gain because now they have more options and choices and maybe prices come down in some of their usage. So this is something I believe we're doing. I think OSC is starting to do it now as well, but I can't speak for the other ones. BCFSA is doing it as well. But I think it's a huge advantage and again, something we need to promote more to the public.

ADAM GARETSON: Got it. And maybe we can talk about that a little bit more in depth as well. We often hear about things like sandboxes, innovation offices and new products coming in. What does that look like, whether that's already regulated entities that are looking to develop a new product or a new market entrant coming in? How do you see that landscape for the innovation office, that sort sandbox environment?

You're looking for regulated entities launching new products coming in and you're looking for new market entrants to come into that door as well? Yeah?

DEXTER JOHN: Full array. So if you're a regulated entity, great. And our care and control, so to speak. But if you're just thinking about coming into the marketplace, or you have an idea, just contact us and we'll put together-- we have the criteria that's required, then we'll put together that sandbox and allow you to play in it, so to speak, and then again, provide the governance that you're required, feedback.

And then if it's something that it fits into one of our regulated entities sectors, great. If not, it's a conversation we need to think about. Again, there's something more for us to regulate. There's more out there. There's so much that we don't touch right now that maybe we should be thinking about in terms of even stuff that we're talking about today in the payment side of things, insurance.

The fact that now you're going to be able to have your insurance broker offering insurance inside your dealership. These are things that we need to start figuring out what that looks like and how we're going to regulate that as well.

ADAM GARETSON: Yeah, that forecasts what my next question was going to be is to say when you're looking at the innovation office, you're looking at the sandbox, you're seeing things come in. You're saying, we had three. Now, we're up to 12. I'm not sure if you're able to speak to anything in particular, but just more macro trends. Are there certain types of products you're seeing come in?

Are there different types of products, different types of initiatives that you're seeing from a trending perspective that is shifting your focus?

DEXTER JOHN: It's hard to say because I only hear about the innovative, the real cool stuff. Those guys are working on the day to day stuff. Hey, Dex, this is something looks really interesting. So from that perspective, new innovative things that we've not thought about before, I would say about two or three that I'm hearing and seeing about. And I think from what I've seen to date, look really interesting if it works out.

ADAM GARETSON: Yeah, no, that's helpful. And just in terms of the projects, are you seeing them cross sector? Are they data-driven? What are the metrics or elements of that you're seeing and that you're focused on?

DEXTER JOHN: Yeah, there is cross-sectoral. But I would say most of it's data-driven. On top of that, just to-- since we just talk about data for a bit, we had this massive project we were working on before I joined that, as you can imagine, big projects have obstacles and went off the rails. We've brought it back, got our arms around it now.

And we have five different components to it. It's called FSRA Forward. And one of our components are EDC for the credit unions. And the data that we are now pulling in now will put us in a position to assist the credit union space in terms of letting them know what trends are, what to expect, if credit unions should be contemplating a synergies or other mergers and acquisitions.

That data is now there for us, but also we share with them, and then they have a better understanding of their own capital requirements, liquidity requirements and being in a better position to make decisions for their future. So again, that's something that we're working on. I just wanted to share that with you all. But that type of data that we're generating and pulling out now is going to be useful across all sectors.

ADAM GARETSON: Yeah, that's super interesting to hear. That's the first time I'm hearing that. So very interesting. And if I could ask a bit of a follow-up on that, just to unpack it a little bit. Yeah. So obviously, you're receiving a lot of data and you're sharing it with your regulated entities and other stakeholders. Does that lean into the idea of driving innovation, investment, allowing for growth?

You're actually fostering-- giving the tools back to participants that they can use to help grow investment in Ontario in their business models and things like that.

DEXTER JOHN: Absolutely. That's the plan. That EDC project is just for credit unions. We got one for mortgage brokers, like I said, five of them going on. It's going to take about two or three more years for completion. But the information that we're getting, the data is to foster that. I think it's really important-- we live in a data age now where every decision is made, everything we do, there's some analytics behind it on our phones.

So we need to get up to speed where truth be told, we're about maybe 10 years behind. So this will get us to maybe 2023. But we're moving in the right direction. But ultimately, the real goal is focusing on the credit union space, is to allow for them to have better control of their futures. There's a lot of competition coming in now with respect to open banking, FinTech stuff.

The credit unions play an important part in our community. And I think if you were to ask me what's something that keeps me up at night, it's that, making sure that they are going to be around 5, 10, 15 years down the line, especially in the communities that don't have the big banks. So again, we have issues in that space, in terms of knowledge.

We have boards that are made of members and maybe they're not most knowledgeable of proper governance methods. And so again, our perspective is to ensure that they get the education and the knowledge that they can do better, make better decisions.

And then also for these smaller ones to be more liquid and have more capital control if they need to do a merger and acquisition or any synergistic opportunities out there for them to come to that on their own, not FSRA to say, hey, we think you should do this because of that.

ADAM GARETSON: Got it. Yeah, no, that's really interesting. Thank you for that insight. You touched on what's keeping you up at night. Obviously, that's one of the questions that we want to get to. But getting to that perspective of trying to make sure that there's health and growth in the ecosystem over the medium to longer term period, that's definitely something that seems like a very valid initiative that really is going to foster growth in Ontario.

Maybe just pivoting from that a little bit. While you're looking at that direction from a strategic perspective, there's the balance side from the consumer protection or risk side. I'm sitting here wondering what are other things that maybe keeping you up at night? Risks that you're focused on. You touched a little bit on liquidity. Is it that? Is it more operational?

We obviously see a lot of emerging types of assets and technologies here. That's certainly a big focus at Gowling, WLG and our FSxT team. I look pretty closely at digital asset exposures and how those get integrated into the financial system. So wondering if we could get a little bit more from your perspective on what are those emerging trends and the risk side of the profile.

DEXTER JOHN: Well, yeah, all those things are things that keep me up at night and worrisome. Just to start off the first part with respect to the consumer protection side, I think there's a lot of bad actors out there. I'm sure you guys saw the RICO thing in the press recently. There's a lot of predatory behaviors. And we're an organization with only limited staff and limited resources as well.

So one of the things about our principle-based approach is to now-- hopefully with some of the bad actors, we can get outcomes-focused and not having to bring out the whip, so to speak. But at the same time, we really have to focus on the real bad players that are taking advantage of the elderly and the disadvantaged and the vulnerable.

And that is an area where to me, it's really important because in times like now where you're starting to see a lot more of that, the pyramid schemes, the mortgage frauds, all these things. And they hurt individuals. My mom, your mom, whoever it could be. Our parents, family we're close to.

So it really is important from that perspective, on the market conduct is for me to focus with my team to be able to have a laser-like focus on those big issues where we can actually have some outcomes. The small time things, yes, we have to deal with those, but if we can get that through principle-based regulation, then we can address that and not have to use too much resources and incur extra costs for it to do so.

So that is one of the bigger things that we're looking at. In terms of the other areas, like I said, you regulate so much. The life insurance, the life MGAs that we're working on, that is-- I'm sure you're going to start hearing about that in the near future in the press because they're not very happy with us right now with what's coming out in terms of regulation on that.

I believe next July 1 is new optionality in terms of auto insurance, that industry there. That is going to be very interesting because I think-- and I say this wearing my personal hat, not my FSRA hat right now, I answer this is, is that I think people are people. And we live in a very expensive country. And when you have options of insurance, people usually take the one that costs the least amount of money.

But if they don't read between the lines, they might find out with this new optionality that you're going to get an accident and you may not be covered. So these are things that we're dealing with, the minister's office, and I'm putting my FSRA hat back on now, trying to highlight with them that we need to be very careful here because I don't want to say we're in the genie of the lamp, but what's coming down the pipeline makes me a little bit nervous.

ADAM GARETSON: Got it. Yeah, and some of the things that you've been talking about up here today, filling the gap with the trust and credit unions where big banks may not be able to be in the space, new and emerging issues that have risk, potential profiles that could have material impacts on more vulnerable communities, it seems like the focus is in part at least on where the gaps are, right?

Whether it's from a financial services and inclusion perspective or where are the more vulnerable members of society. Is that how you put a lens on the emerging risk profile?

DEXTER JOHN: Yeah, no, I think that's fair. That's a fair assessment. Like I said, we can talk about 25,000 other risks that are out there. But I think right now, in terms of just our mandate, knowing what the political side is, what their focuses are, those things I would say right now are our priorities.

ADAM GARETSON: Yeah, got it. And from not necessarily political side of things, but from a harmonization side, when we think about strategic priorities that not only exist in Ontario, but other provinces and at the federal level, do you see more opportunities for harmonization, whether it's at intra-provincial level? We hear about breaking down barriers.

We've seen a lot coming out from a federal perspective as well. It seems from a non-regulator's perspective that there is opportunity for harmonization both intra-provincially, federally, and across the provinces as well on some of these issues that we've been talking about, whether it's emerging technology or filling the gaps. How does that look from a harmonization perspective from your lens?

DEXTER JOHN: Yeah, no, I love getting this question because it's a great question. It's a bit frustrating too because harmonization is a beautiful word that we all use. The government and politics. Usually, politicians use it. But what no one really understands is that for that to happen, you need cooperation. So there's so many low hanging fruits right now.

And we are so much pushing for more harmonization and breaking down, eliminating red tape. But the issue is-- and a little bit I would to say inter-provincially-- extra-provincially, sorry, is that I would say we get out our own way. The egos at the table. We can't do some things that we want to do because we need legislation to change.

That's the thing no one talks about is that, oh, great, you can harmonize this and that but no one's telling you that-- I'm not going to say a province, but say province x, y, z does not want to change that legislation to allow us to do that. So until we get that, we can't have the harmonization.

So we're working on a few, like I said, low hanging fruits that we can get completed, getting regular forms, similar forms that we could do within Ontario and maybe BC and other provinces. But to get that full harmonization that we're talking about, we really do require legislative change in certain areas. And then by doing so, then we can actually achieve that goal.

But it's something that we talk about so much internally. I have meetings at the minister's office about this stuff. And it gets to the point where I'm like, guys, we get it. But I need our friends at other provinces to work with us. So again, it comes back to the first thing I said in the beginning. We need to work amongst all provincial regulators to be aligned in what we're trying to achieve here.

This is not about power, control, or who has the last say. We just need to really just recognize that if we want to make Ontario or any province or just Canada better and eliminate red tape for consumers and/or regulated entities, we need to do this. And it's a shame that we haven't gotten further along down the line than we are today's date.

But I can at least tell you that there are a few things you should be hearing about in a couple of weeks that are going to be announced that will allow us to get there.

ADAM GARETSON: Nice. Thank you for that preview. And thank you for bringing it back full circle because we are getting towards the end of our time here this morning. So I think last question, or if there's one way we can leave some takeaways for our audience other than the fact that in a couple of weeks, we're going to be seeing more from the office that's going to be things that are our membership and viewers should be looking out for, are there any takeaways that you'd want to leave to our audience today?

What are some of the key things that you'd like folks to know about what's going on at FSRA?

DEXTER JOHN: Yeah, no, I think based on what's here in the room, who's here in the room, I think just talk to us about our sandbox. I know we don't regulate most of you here, but anything that we do or you want-- not want to be regulated by us. Who does? But I say that wants to be regulated. That's what I really mean. But ultimately, we have areas that we can work with you.

So I think it's very fair to say that if there's any ideas, any thoughts you want to bring forward, please. We're open. It's confidential. We'll let you know if it's something that can work, and you can get that test and learn environment and offer it to the public. And at least that way you know you have a check mark from FSRA.

ADAM GARETSON: Amazing. Thank you so much for your time. Appreciate your insights. This was really informative. Thank you so much.

DEXTER JOHN: Thank you. Appreciate it.

ALANA SCOTCHMER: We are now going to resume our program and continue with our next speakers. It's my pleasure to introduce Ron Morrow, the executive director of payments, supervision, and oversight at the Bank of Canada and my partner, Parna Sabet-Stephenson, who is the leader of our financial services and technology FSxT group here at Gowling WLG. So please join me in welcoming Ron and Parna.

PARNA SABET-STEPHENSON: So first of all, congratulations on the much expanded [AUDIO OUT]. Last time we spoke, there was no [AUDIO OUT]. And how is it going so far? [INAUDIBLE]

RON MORROW: It's going well. It's been a few weeks. So we've moved along on [INAUDIBLE], and we'll come back to that. The civil cloning legislation, that's something we've been talking [INAUDIBLE] for a while, so I feel like we're well poised [INAUDIBLE]. Open banking. Very excited about the new [INAUDIBLE] the confidence the government's shown in us to oversee it.

My analogy is we're the strange new character entering the stage right in act 2 of the play. So we need to get up to speed, get caught up with the [INAUDIBLE]. I know our colleagues at FCAC will be very helpful in terms of transition. [INAUDIBLE] with the Department of Finance. We've been working very hard on this. Very knowledgeable. They'll get us up to speed as well, and we'll move as quickly as we can to move ahead [INAUDIBLE].

PARNA SABET-STEPHENSON: So, let's first start off with RPAA. So Post September 8, [INAUDIBLE].

RON MORROW: So the regime is up and running. We have over 1,500 applicants to the regime. At last count, I believe last week we had 600 of them actually registered. So the registrations are moving through. We've been processing them. We've got the last mile of the registration process. It's the national security screening with the Department of Finance and national security agencies.

So they're just working through that. So I expect we'll be able to hear through the vast majority of our applicants in the coming months and move ahead. But it's moving along. And we've already pivoted to start our supervision. So it's [INAUDIBLE] doing some deep dives on a PSP's. Number one, just to go through it as a group in terms of what does it mean to actually supervise a PSP.

How do we have common approaches, common views on what's acceptable and what isn't from a risk perspective for us? So that's what's underway. And we'll get that out of the way. And supervision will ramp up from there.

PARNA SABET-STEPHENSON: So are there some key trends or perhaps challenges that you've noticed with these early registrants?

RON MORROW: I'd say it's early to talk about too much in terms of trends. No real challenges at this point. The biggest challenge, honestly, has just been getting through the registration process. We're working our way through that and looking forward to working with the industry thereafter.

PARNA SABET-STEPHENSON: So in terms of the lessons learned from the RPAA, what are perhaps some of the lessons that you think will serve you well in setting up the consumer-driven banking and stablecoin regimes? Or perhaps what is it that you will look to do differently?

RON MORROW: I think what served us very well as we were pulling together our retail payment supervision regime was the work that we undertook with the industry as the legislation and the regulations were being built. We set up groups of payment service providers who served as a consultative body to help us think through how to design the regime in a way that both worked for us and worked for the industry.

So we'll be looking to replicate that as much as possible. We'll want to have engagement with the industry as the regulations get drafted, both for the stablecoin regime and for open banking. That said, on the open banking front, I know there's been a lot of consultation that's already taken place.

PARNA SABET-STEPHENSON: Indeed.

RON MORROW: I think there's a good sense of what the regulations need to look like and how they need to be built. And that knowledge resides within our colleagues at the Department of Finance. So we'll work with them. Nevertheless, I think there still has to be some sounding with industry along the way to make sure that there aren't any issues that get-- unfortunate issues that get baked into the regulations.

PARNA SABET-STEPHENSON: And we heard earlier about collaboration between perhaps provinces and federal and provinces as well. So in that regard, as far as we're concerned with consumer-driven banking and both stablecoin, there is a certain level of collaboration that's really anticipated.

How do you think that's going to go in terms of stablecoin with the provincial securities regulators, as well as market conduct for all, but also credit unions and the consumer-driven banking regime?

RON MORROW: So the legislation has baked in other collaborative elements to it. So both in the form of the RPAA for retail permits oversight as well as in the open banking legislation and in the stablecoin legislation, there's the ability to recognize equivalent supervisory regimes elsewhere. So if a province wants to develop an equivalent regime, they can do that.

And they can look after regulating those aspects of the regime instead of the bank or the federal government. So some provinces may indeed elect to take that option, others might not but it's really designed in a way to allow for the federal regime and the provinces to coordinate together, where provinces want to step in, to allow them to step in with equivalent regimes.

PARNA SABET-STEPHENSON: So does this mean that maybe someday the Bank of Canada could also handle market conduct in that same fashion of entering into agreements with provinces to take over some of what they would have otherwise done? Because that would create some sort of consistency as well that we're really striving for.

RON MORROW: So fortunately, consumer protection is something that is dealt with not by the bank, but by our good friends at FCAC. So I think there's scope for some sort of coordination between the Federal Consumer Protection Regulation and provinces. Consumer protection is very clearly a provincial mandate, but I think there's scope for coordination between those two.

But no, I don't think that, that type of consumer protection mandate is something that-- it's certainly not something that the bank is seeking, and it's not something that I think is core to capabilities or our competencies. There are others that are already doing a good job.

PARNA SABET-STEPHENSON: It would just make life so much easier to have that--

RON MORROW: I know. I know.

PARNA SABET-STEPHENSON: You just want to create more work for lawyers here. So the proposed legislation for consumer-driven banking, it's drafted clearly with the intention of avoiding compliance duplication for the registered PSP's. So how do you intend on operationalizing that internally, both in terms of-- as much as perhaps the guidances as well as people, process, and technology involved?

RON MORROW: So it's a little early for me to say exactly how that's going to work. I can speak to it conceptually. So as an example, if you're a PSP that's registered under the RPAA and you're overseen by the bank, that means you have already gone through a national security screening. We don't have to replicate that for open banking if you want to become an open banking applicant.

So I think there are obvious ways in which we can-- you've already ticked the boxes in one regime. You don't have to tick them in the other. When it comes to things like operational or cyber risk, the requirements might be slightly different between the two regimes in terms of the level of specificity you need to be able to demonstrate to show that you're compliant with the regime.

I think it might be a higher bar for open banking than it might be for the RPAA. So those are the types of details we're going to have to ourselves out. But we will have harmonization in mind along the way. We don't want to make anyone redo the work that they've already done to be able to join the new regime.

PARNA SABET-STEPHENSON: So we shouldn't necessarily assume that whatever is expected of the registered PSP's that we will see the same requirement for the consumer-driven banking one? Because in some cases, depending on the topic, it may be lower or higher.

RON MORROW: Yeah, there'll still be meaningful requirements, but there might well be differences, and we might have to deal with that delta as part of the registration process.

PARNA SABET-STEPHENSON: Sure. So would you then anticipate the RPAA requiring any amendments?

RON MORROW: So for the RPAA, there will be-- there are some amendments that are going to be required. I'm not sure about open banking. That will depend on what-- as we move to payment and transaction initiation phase in '27 maybe some changes required there, but I don't know. I haven't thought about it, quite frankly.

When it comes to the stablecoin legislation, I think there are some amendments that may well be required if you think about stablecoins as being designated as an eligible payment that would be covered by the Retail Payments Activities Act. I think the way the act is currently written, the rules around safekeeping of payments, there might be some changes that are required if you think about safekeeping for stablecoins but more details to come on that.

PARNA SABET-STEPHENSON: And speaking of stablecoins, so there's been so much excitement around that. What are some of the international jurisdictions that restrictions that perhaps you're following more closely as you look to legislation, development of regulations and so on, as well as oversight perspective?

RON MORROW: So I know the team at the bank and the Department of Finance have looked at other leading jurisdictions, Europe, the MiCA legislation, obviously the GENIUS Act in the United States, a few other jurisdictions internationally. I think two thirds of countries globally have stablecoins or crypto related legislation.

Now, the legislation in Canada is, I would say, narrower than many other cases. It is really focused on the issuance and redemption of stablecoins. It doesn't speak to the trading or exchange of stablecoins. The GENIUS Act talks about payment stablecoins so it envisions payments as a function. The MiCA in the EU classifies stablecoins, I believe, as e-money.

So that's not what's done here in Canada. The focus of the Canadian legislation really is squarely on making sure that the stablecoin is indeed stable, that there are a pool of assets that are safe and liquid that are held arm's length by a third party separately custodied and can be used to redeem the stablecoins in the event that the stablecoin holders demand their money back.

So I guess my punchline here is it's similar but narrower legislation here in Canada.

PARNA SABET-STEPHENSON: And that distinction that you mentioned is also very important by virtue of the fact that our securities regulators will continue to play an important role in stablecoins as just in respect of the issuance of it, that the Bank of Canada will take on responsibility.

And what implications then do you see for our domestic payments infrastructure that we've been talking about today as well and for payment service provider oversight generally under the RPPA as stablecoins emerge?

RON MORROW: I think more broadly in the world of payments, we're entering a world of what I would call live experimentation. So I think we're moving into a world where we have the conventional payment system. We have a new real-time rail that will be coming online. There will be stablecoins that get issued. It wouldn't surprise me if banks come forward with tokenized deposits.

First Bank already has a tokenized deposit product in market or in beta right now. Tokenized money funds. That's something you see being developed in the US, something you could see develop here in Canada, where all these new forms of tokenized payments and new conventional infrastructure, like the real-time rail, will be competing for market share in the payments space.

There'll be different use cases that these products lend themselves to or don't. And I'm very interested to see how it develops. And there are going to be competitive responses by banks, by card companies, by others. So what's it going to look like at the end of the day? Honestly, I'm not sure.

But what I do think is the end game is going to be faster and cheaper payments for end users. And it's going to be an interesting road in terms of how we get from here to there.

PARNA SABET-STEPHENSON: And what about how we should treat perhaps foreign stablecoin issuers here?

RON MORROW: So under the legislation, the legislation does give the governor the ability to recognize equivalent regimes, both provincial regimes as well as international regimes. So you could imagine let's say a large foreign stablecoin that is used broadly in the world, that has a broadly equivalent regulatory regime to the Stablecoin Act here in Canada.

In that instance, we would be in a position to be able to designate that or acknowledge that regulatory regime and rely on their oversight of the regime to make sure it's safe. So how's that going to work in practice? Well, regulations still need to be drafted here. It's early days. But the intent is the ability to be able to recognize equivalent international regimes.

PARNA SABET-STEPHENSON: And ideally, that perhaps would be in respect of all payment methods and products, I guess, over time.

RON MORROW: Yeah, certainly with stablecoins. Yes, absolutely.

PARNA SABET-STEPHENSON: So I appreciate that only a week ago, your role had not been expanded in the manner that it is today. But what can we anticipate for 2026?

RON MORROW: 2026 is going to be a very busy year in terms of drafting regulations. So we'll be working closely with our colleagues at the Department of Finance to develop the regulations for the open banking regime, I should say the consumer-driven banking regime, equally on the stablecoin mandate. We'll be working closely with them to develop regulations.

I know the government wants to move very quickly on consumer-driven banking. So we'll work with them to see what can be done to get that up and running as quickly as possible. We'd like to do the same thing with regard to stablecoin regime, but I think much of the first half of the year anyway, is going to be rolling up our sleeves to think hard about those regulations and then going out for public comment on the regulations that get drafted.

So I don't think anything goes live necessarily in 2026, but it will be setting the stage for things to go live, either at the end of the year or early next. For the RPAA, it's more business as usual. We'll finish the registration process for the PSP's and continue our supervisory work going forward.

PARNA SABET-STEPHENSON: And we can expect engagement with stakeholders generally as well?

RON MORROW: Yeah, oh, absolutely. We don't want to do any of this work in a vacuum. It will benefit from hearing people's feedback and comments. We don't necessarily always take the feedback and comments. We'll be able to tell you why we didn't and what our thinking was on that.

PARNA SABET-STEPHENSON: So we appreciate how incredibly busy the bank has been. So thank you so much, Ron, for taking the time to talk to us today.

RON MORROW: Thank you very much for the invitation, Parna.

PARNA SABET-STEPHENSON: Thank you.

RON MORROW: Thanks.

ADAM GARETSON: What a great morning it has been here. So on behalf of Gowling WLG Financials Services and Technology Group, I want to extend a sincere thank you to our speakers and our guests for making this iteration of our FSxT Connect Regulatory Pulse such an engaging and insightful event.

We've heard from Payments Canada at the beginning about the modernization of our payments infrastructure and how innovation and regulation can work hand in hand, including to build a more resilient ecosystem. We explored FSRA's evolving approach to financial oversight and collaboration. And finally, we heard from the Bank of Canada on broader trends shaping the future of digital finance, stablecoins, RPAA, et cetera.

So across every conversation that we've had, certain themes have stood out and to me, certainly, it is that progress in financial services is a shared effort where regulators, business leaders, innovators, and industry professionals play a role in shaping the framework. And it really is that collaboration that drives impact in the Canadian market.

So I'd like to thank Jude Pinto, Dexter John, and Ron Morrow for being here today. I'd like to thank my colleagues Alana Scotchmer, and Parna Sabet-Stephenson, the leader of our FSxT group, for all of the efforts in bringing together such an exceptional morning for us. And to our incredible team behind the scenes as well for contributing too.

So thank you to everybody online for joining us. Thank you to everybody in the room. We look forward to seeing you at our next FSxT Regulatory Pulse event. Have a great rest of your day.