The federal government said the Bank of Canada would spend $10-million over two years to administer the legislation, starting in 2026-27.Brendan Burden/The Globe and Mail
Stablecoin companies and advocates are hailing Ottawa’s new federal framework for the digital currency as a milestone in legitimizing the asset and the start of “the digital dollar era” in Canada.
The Carney government promised in Tuesday’s budget to introduce federal legislation regulating the issuance of stablecoins, which proponents say gives credibility to the currency as a real form of payment, protects consumers and businesses, and is key to spurring innovation in the financial system.
The plan to regulate stablecoins, a crypto asset pegged one-to-one to a fiat currency or commodity, follows warnings from the Bank of Canada and industry groups that the country was falling behind in the race to modernize payments.
“For years, the crypto sector has been asking for clear, proportionate and prudential rules around stablecoins,” said Eric Richmond, general counsel and head of business development at Shakepay, a Canadian crypto trading platform. “This framework is a huge step toward giving us clarity.”
The government said the Bank of Canada would spend $10-million over two years to administer the legislation starting in 2026-27. It will cost $5-million annually to continue overseeing the rules in subsequent years, though expenses are expected to be recovered by charging businesses issuing the currency.
Last week, The Globe and Mail reported that Ottawa was moving to regulate stablecoins in direct response to U.S. President Donald Trump signing the Genius Act into law in July.
The U.S. legislation clearly defined and set out rules for policing stablecoins, sparking concern on this side of the border that the lack of a national framework or a Canadian-dollar-backed stablecoin would drive capital out of the country and into the U.S.
Ottawa’s new legislation will require issuers of stablecoin to maintain asset reserves, such as cash holdings, to lower risk and meet national security standards to protect consumers and businesses.
The budget also signalled plans to amend the Retail Payment Activities Act, which governs the activities of payment service providers such as PayPal. It’s designed to protect consumers by ensuring that funds held by such providers are segregated and shielded from bankruptcy, said Mohammed Muraj, a lawyer at Torys LLP. Currently, the act doesn’t cover digital assets.
“Bank of Canada oversight and amendments to the Retail Payment Activities Act sends a strong signal that stablecoins need to be regulated as payment instruments and not as securities, which has been the default regulatory position in Canada,” said Didier Lavallée, founder and chief executive officer of digital asset company Tetra Digital Group, in an e-mail.
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Making this distinction is critical for many in the industry.
In Canada, digital currencies have largely been treated as securities, which are under the jurisdiction of provinces and territories. They involve administrative and transactional barriers that critics say undermine the core functions of stablecoins and prevent them from moving with ease like currency.
But stablecoins can also act as a payment instrument akin to cash or credit, with oversight happening at the federal level.
While commercial users are often the first to adopt and benefit from stablecoin technology, the regulatory shifts have also opened the door for consumer use to become more mainstream, with Western Union, Amazon and Walmart exploring the launch of stablecoins.
Stablecoins can let users send payments as quickly as texting, avoid foreign transaction fees, and make micro-payments by reducing operational costs.
“Paying with bitcoin is like agreeing to pay for your lunch with shares of a tech startup,” said Ron Morrow, the Bank of Canada’s executive director of payments, during a September conference. “By the time the restaurant cashes them in, the price of your sandwich could have doubled – or halved.”
Stablecoins are different. Backed by real, liquid assets, they’re designed to be less volatile and more appealing to businesses and governments.
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“This is just a huge opportunity for everyone in Canada that uses the internet and spends money,” said Coinbase Canada chief executive officer Lucas Matheson.
“The digital dollar era in Canada starts today,” said Mr. Matheson. “It’s a huge milestone for our industry.”
For Shakepay, the new rules open the door to safely integrate future Canadian-dollar-backed stablecoins into their platform, said Mr. Richmond. “The key now will be implementation: making sure the legislation is tabled quickly and fintechs can participate and help bring a trusted, Canadian-dollar stablecoin to market.”
Absent from the budget was any mention of how exactly stablecoin activity by banks will be regulated.
Matthew Burgoyne, a lawyer at Osler, Hoskin & Harcourt LLP, said the current framework doesn’t clarify what types of stablecoin activity will be in the domain of provincial securities regulators versus federal authorities. “I suspect that a stablecoin that pays yield to the holder would be excluded from the federal legislation,” he said.