Building upon the Government of Canada's 2023 Fall Economic Statement (FES 2023) released on Nov. 21, 2023, we are looking ahead to Budget 2024, scheduled for April 16, 2024. We expect the federal government to continue to focus on innovation and the safety and integrity of Canada's financial sector in the evolving risk environment. In this article, we predict developments to watch for in Budget 2024 that may affect the financial services and technology sectors in Canada.
Consumer-driven banking
After much anticipation, Ottawa is set to unveil its consumer-driven banking (and otherwise referred to as "open banking") framework in Budget 2024. We expect that the framework will be accompanied with timelines for implementation, with legislation to be introduced in the fall in connection with the second budget implementation act (more on this framework here).
Artificial intelligence (AI)
On April 7, 2024, Prime Minister Justin Trudeau announced that Budget 2024 would include a $2.4-billion package of measures to secure Canada's AI advantage, including $2 billion focused on AI compute.
The purpose of this $2 billion investment in AI compute is to build and provide access to computing capabilities and technological infrastructure for Canada's world-leading AI researchers, startups, and scale-ups. As part of this investment, the government will consult with AI stakeholders to inform the launch of a new AI Compute Access Fund created to provide near-term support to researchers and industry, and develop a new Canadian AI Sovereign Compute Strategy to catalyze the development of Canadian-owned and located AI infrastructure.
Beyond investing in AI compute, the balance of the package will:
- help to create a new Canadian AI Safety Institute;
- strengthen enforcement of the proposed Artificial Intelligence and Data Act;
- support workers who may be impacted by AI;
- help SMEs scale up and increase productivity by building and deploying new AI solutions;
- support new AI technologies; and
- accelerate AI adoption in critical sectors such as agriculture, cleantech, healthcare and manufacturing.
Regulating digital assets
Following the release of the Standing Committee on Industry and Technology's (INDU) report Blockchain Technology: Cryptocurrencies and Beyond in June 2023, digital asset market participants have been waiting to see whether matters affecting the industry will be directly addressed by the government. Numerous industry representatives have provided written submissions to the House of Commons Standing Committee on Finance as part of its 2024 pre-budget consultations which focus narrowly on stablecoins, central bank digital currency and the development of a national blockchain technology strategy.
FES 2023 stated the Office of the Superintendent of Financial Institutions (OSFI) is expected to consult with federally regulated financial institutions on the implementation of public disclosure of crypto-asset exposures, accompanying work being done by the Basel Committee on Banking Supervision and the Financial Stability Board. In November 2023, Canada announced its intention to implement the Organization for Economic Cooperation and Development's (OECD) crypto-asset reporting framework to help combat global tax evasion. Transposing the OECD framework into domestic law would allow for the collection and exchange of information by and between tax authorities representing approximately 50 participating jurisdictions beginning in 2027. Budget 2024 may provide updates with respect to these initiatives.
Real-Time Rail
With consumer-driven banking on the horizon, the next hurdle for Canada's payments ecosystem is the introduction of Canada's first real-time payment system, the Real-Time Rail (RTR). Changes to the Canadian Payments Act are proposed in the FES 2023 implementation legislation, which would expand Payments Canada membership eligibility to payment service providers supervised by the Bank of Canada, credit union locals that are members of a credit union central and operators of designated clearing houses. These changes will eventually pave the way for the introduction of the RTR. Payments Canada indicated in its 2023 Q4 Delivery Roadmap Update that it expects to provide an update on RTR in Q1 of 2024. It is possible that Budget 2024 will contain announcements relating to RTR now that we are closer to the implementation of consumer-driven banking in Canada.
Anti-money laundering / Anti-terrorist financing
The Canadian government remains focused on addressing financial crime. We expect Budget 2024 to build upon its recent work to combat money laundering and terrorist financing in Canada, including in Canada's financial sector. In particular, Budget 2024 may introduce further changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) further to a recently completed public consultation process. This may also involve enhancing the powers of Canada's primary AML/ATF regulator, the Financial Transactions and Reports Analysis Centre (FINTRAC).
Combatting security risks to the financial sector
FES 2023 introduced changes to further the government's focus on addressing security risks to Canada's financial sector. The federal government signaled in FES 2023 that it would evaluate the use of its new national security powers to determine if additional changes should be included in Budget 2024. These national security powers were introduced in response to the evolving technological and geopolitical risks facing the financial sector. As these risks persist, we may see changes in Budget 2024 that expand the federal government's toolkit in response to such threats.
We will continue monitoring developments on these topics, including with those that are announced in Budget 2024. Our professionals are available to assist stakeholders in assessing these trends in the industry and advising on any concerns or questions about implementing proposed changes.
For any questions you may have about this article, please feel free to contact the authors or a member of our Financial Services Regulation or Artificial Intelligence Law groups.