The Canadian Securities Administrators (CSA) has released its Systemic Risk Committee annual report on capital markets for 2025, which revealed that the heavy reliance on a few artificial intelligence (AI) models could negatively affect liquidity conditions and volatility.
According to the CSA’s news release, the recently published report delves into financial market trends, emerging risk areas, and possible vulnerabilities in Canada’s capital markets.
“At a time of uncertainty, when markets are looking for stability, the CSA is setting out its analysis of current and emerging risks, to help our market participants and investors navigate these complex times,” said Stan Magidson, CSA chair and chief executive officer and chair of the Alberta Securities Commission, in the news release.
The report determined that the increase in AI utilization, with a concentration of organizations creating third-party dependencies for the financial system, could affect financial stability.
The report then discussed the swift growth of stablecoins in the crypto ecosystem and the risks arising from high market concentration. The CSA found that stablecoins currently did not appear to constitute a systemic risk.
However, the CSA emphasized the need for global regulatory coordination in managing possible risks. In 2025, the US adopted the GENIUS Act, while Canada introduced legislation seeking to regulate the issuance of fiat-based stablecoins.
In its news release, the CSA listed other trends and vulnerabilities addressed in the report:
- increased clearing activity for derivatives and repurchase agreements
- the potential effects of trade pressures on non-financial corporate bonds
- stable liquidity in Canada’s fixed-income markets
- over-the-counter derivatives developments
- private asset fund liquidity issues
Era of uncertainty
“The 2025 report comes at a significant moment for Canada in the global context,” Magidson said in the CSA’s news release.
The CSA acknowledged the heightened economic and financial uncertainty of these times. The CSA noted that trade issues slowed the economy, especially in the manufacturing sector.
Amid this era of uncertainty, the CSA highlighted the continuing resilience of the Canadian financial system in 2025, with economic growth stronger than initially expected.
CSA’s efforts
The new report touched upon the CSA’s efforts to address vulnerabilities and their associated risks.
In its news release, the CSA shared that its Systemic Risk Committee, established in the aftermath of the global financial crisis, serves as the main forum for the CSA’s staff to assess and monitor systemic and emerging risks.
In 2022, the committee commenced an annual systemic risk survey, which sought input from market participants on financial risks.
The CSA noted that it engaged with federal and provincial agencies – directly or via the Heads of Regulatory Agencies Committee and its Systemic Risk Surveillance Committee – to keep track of emerging and systemic risks and develop mitigation strategies as appropriate.