In a narrow parliamentary vote, Canada has approved a federal budget that establishes the nation’s first comprehensive framework for stablecoins, marking a pivotal step toward legitimizing the use of digital currency while aiming to protect consumers.
The policy, embedded deep within Prime Minister Mark Carney’s budget, positions the Bank of Canada to oversee private stablecoin issuances. This move aligns Canada with global regulatory trends and attempts to balance financial innovation with stability.
The new rules of the game
The approved framework establishes strict requirements for companies issuing stablecoins in Canada. All issuers must maintain a 1:1 reserve of Canadian dollars or other high-quality liquid assets to back every digital token in circulation. This ensures users can always redeem their stablecoins for their full face value.
The Bank of Canada will act as the central regulator, maintaining a registry of approved issuers and enforcing rules around risk management, cybersecurity, and contingency plans for business failures.
In a controversial decision, the policy prohibits non-bank issuers from offering any interest or yield on stablecoin deposits, a feature common in other jurisdictions that can attract users.
Industry reaction: A cautious welcome
The industry has responded with measured optimism. Lucas Matheson, CEO of Coinbase Canada, called the framework “a step in the right direction” but urged regulators to create an interim path for Canadian-dollar stablecoins to reach the market faster.
Matheson also argued that allowing issuers to share yield with customers would enhance Canada’s global competitiveness and help maintain the Canadian dollar’s influence worldwide. This highlights a key tension between consumer protection and fostering a competitive digital asset industry.
The Global Context and National Sovereignty
Canada’s move comes as other major economies establish their own rules for digital currencies. The United States has advanced its own federal stablecoin bill, while the European Union is rolling out its MiCA regulation.
This global regulatory wave is partly driven by concerns over economic sovereignty. With over 99% of stablecoins currently pegged to the U.S. dollar, there are worries that widespread adoption could undermine Canada’s control over its monetary policy and increase borrowing costs.
The government’s goal is to ensure Canada doesn’t just withstand global shifts in digital payments but prospers from them. The budget allocates $10 million over two years to administer the new regime, with ongoing costs covered by regulated issuers.
What comes next?
While the budget approval is a significant milestone, draft legislation and detailed consultations are expected in late 2025 or early 2026. The success of this framework will ultimately depend on its implementation, finding the right equilibrium between safeguarding the financial system and not stifling the innovation that makes digital currencies valuable.
For Canadians, this development signals that regulated digital currencies are coming. The government is betting that clear rules will foster trust, leading to faster, cheaper payments while ensuring the Canadian dollar remains relevant in an increasingly digital global economy.
