The Bank of Canada’s executive director of payments Ron Morrow called on federal and provincial regulators to ‘work quickly and collaboratively to evolve our regulatory frameworks.’Brendan Burden/The Globe and Mail
The Bank of Canada says the federal government should consider regulating stablecoins in light of growing interest in the digital asset in Canada and a push by the United States to enable widespread adoption.
In a speech on Thursday, Ron Morrow, the central bank’s executive director of payments, said that Canada is behind other countries in developing rules for the use of stablecoins, which are a kind of cryptocurrency pegged one-to-one to a fiat currency or stable commodity such as gold.
In July, the U.S. passed a bill dubbed the GENIUS Act, which established a framework for regulating stablecoins. This set out rules around the type of collateral that can back stablecoins and laid out various consumer protection measures.
“Governments are moving to regulate stablecoins and other cryptocurrencies so consumers can reap their benefits and be protected from credit and liquidity risks. In fact, many jurisdictions worldwide either have, or will soon have, a regulatory framework for cryptoassets,” Mr. Morrow said at a conference in Ottawa.
Canada, he said, should “weigh the merits of federal stablecoin regulation, similar to what other countries have done.”
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Mr. Morrow said oversight of digital assets in Canada currently rests with provincial securities regulators, while the federal Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) oversees virtual currency exchange or transfer services.
He called on federal and provincial regulators to “work quickly and collaboratively to evolve our regulatory frameworks.”
To date, stablecoins have mainly been used to facilitate speculative trading, though proponents of the digital assets say they could make money transfers faster and less costly. Critics have warned that because of their decentralized nature, they could be used to make illegal financial transactions. Other risks include cyberattacks or the assets not being properly backed by collateral.
Since first being introduced by crypto company Tether and tied to the U.S. dollar in 2014, stablecoins have begun to enter the mainstream.
Stablecoin issuer Circle Internet Group Inc. went public in July, raising US$1.1-billion. Bank of America and Citigroup are among the U.S. banks considering launching their own stablecoins, and PayPal and Visa now offer stablecoin payment options.
Some Canadian companies have begun to adopt the technology. In June, Ottawa-based e-commerce company Shopify launched a stablecoin option for merchants through a partnership with Coinbase and Stripe. And last week, Calgary-based financial services company Tetra Digital Group closed $10-million in funding to launch a Canadian-dollar backed stablecoin in 2026.
Looking beyond stablecoins, Mr. Morrow said that Canada has lagged behind other jurisdictions when it comes to payments and financial system innovation. The Real-Time Rail payment system has been delayed for years – although Mr. Morrow said that industry testing on the system is expected to begin soon. And the 2024 open banking act still requires additional legislative changes to become functional.
“The pace of change here in Canada has been – to use a kind word – gradual. Other major jurisdictions like the United Kingdom, Australia and the European Union have already embraced changes in many areas,” he said. “Clearly, there is a need to accelerate change within our own borders.”
Last year, the Bank of Canada became the regulator for digital payment processing companies.
Mr. Morrow said the bank is now overseeing around 1,500 payment service providers, and reiterated that “all PSPs are now expected to comply with their regulatory obligations.”