Canada’s New Regulations on Stablecoins
In a significant move towards regulating cryptocurrency, Canadian authorities announced plans to implement new laws governing fiat-backed stablecoins, as part of the 2025 federal budget. This decision aligns Canada with the United States, where similar legislation was enacted in July through the GENIUS Act, aimed at establishing a legal framework for stablecoins.
Requirements for Stablecoin Issuers
Under the forthcoming regulations, companies issuing stablecoins in Canada will be mandated to:
- Maintain adequate reserves
- Develop clear policies for redeeming their tokens
- Adopt various risk management strategies to safeguard user data and financial information
The budget, disclosed on Tuesday, emphasizes these requirements as essential to fostering a safe environment for digital currency transactions.
Financial Support and Market Growth
To support the implementation of these new rules, the Bank of Canada has earmarked $10 million over two years, starting in the fiscal year 2026-2027. Furthermore, it anticipates annual costs of approximately $5 million, which will be covered by fees assessed on the regulated stablecoin issuers, in accordance with the Retail Payment Activities Act.
This strategic approach comes as Canada observes a growing market for stablecoins, now valued at around $309.1 billion, with projections from the US Treasury suggesting it could surge to $2 trillion by 2028. The increasing adoption of stablecoins by major payment platforms such as Western Union, SWIFT, MoneyGram, and Zelle signals a shift in how digital currencies are used in everyday transactions. Toronto-based Tetra Digital, for instance, has recently raised $10 million to launch a digital version of the Canadian dollar, attracting investments from notable firms like Shopify and Wealthsimple.
Central Bank Digital Currencies and Future Outlook
Amid these developments, the issue of central bank digital currencies (CBDCs) has been thrust into the spotlight. Notably, Canada opted to halt its plans for a CBDC in September 2024, as Bank of Canada Governor Tiff Macklem cited a lack of compelling justification for proceeding with such an initiative at that time.
Commenting on the new regulatory framework, Lucas Matheson, the CEO of Coinbase Canada, expressed optimism, stating that it would revolutionize the way Canadians engage with both money and the internet.
This legislation is part of a broader initiative aimed at modernizing the country’s payment systems, ensuring that digital transactions become more efficient, affordable, and secure for Canada’s population of 41.7 million.
