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In a move that could reshape how Canadians transact, Ottawa is preparing to bring a form of cryptocurrency into Canada’s payments system.
The 2025 budget committed Ottawa to creating a national framework for fiat-backed stablecoins, digital assets that are designed to maintain a stable value.
The move could make it easier and cheaper for Canadians to transact.
“The problem [stablecoins] potentially solve is one of transaction costs,” said University of Ottawa economist Mike Moffatt. “Traditional payment systems can be slow [and] high cost — particularly for international transactions.”
Credit cards, debit cards, wire transfers and e-transfers all move money through institutions, such as banks and payment processors, which each take a fee or impose delays. Stablecoin transactions, by contrast, are settled on a shared ledger by moving a digital token from one wallet to another, reducing the number of intermediaries involved in a payment.
Moffatt and others say stablecoins are a reality of the modern economy, so Canada’s challenge now is catching up with other jurisdictions.
“ Stablecoins are happening anyway,” said Moffatt. “So it’s not that we’re moving first here, but rather we’re catching up to the rest of the world.”
Setting rules
Many types of cryptocurrencies are highly volatile assets. For example, Bitcoin, the world’s most popular cryptocurrency, has recently lost about 30 per cent of its value, falling from US$126,000 in early October to around $90,000 today.
As their name implies, stablecoins are more stable assets because they are pegged to a traditional currency — such as the U.S. dollar — and backed by reserve assets held by an issuing company.
Major global issuers of stablecoin include Circle and Tether. Canada currently has only one CAD-denominated stablecoin, QCAD, but it is not widely circulated.
Canada is “the only G7 country without a well-defined regulatory system, either in active or draft form, for stablecoins,” Moffatt wrote in a Sept. 23 paper published by Moffatt’s Missing Middle Initiative research centre. So far, stablecoins have been regulated only indirectly, under provincial securities and anti-money laundering laws.
The federal government is now trying to change that. It has already released draft legislation that, if passed, would make the Bank of Canada responsible for regulating and supervising stablecoin issuers.
“The framework will cover both domestic and foreign issuers that offer fiat-backed stablecoins to Canadians, and it won’t differentiate between Canadian-dollar and foreign-currency stablecoins,” a Department of Finance Canada spokesperson told Canadian Affairs in an emailed statement.
The department says Canada’s approach is meant to align Canada’s rules with those already in place in the U.S. and EU, allowing payment systems to operate smoothly together.
A Nov. 24 petition backed by Liberal MP Nathaniel Erskine-Smith is urging Ottawa to act even more boldly and rapidly on implementing its stablecoin framework. The petition notes that, “Other jurisdictions such as the E.U., U.K., Australia, and U.S. have established clear frameworks for stablecoins and digital assets, positioning themselves as leaders in financial modernization.”
“Canadian fintechs and innovators require clear and fair rules to compete with large incumbents, drive productivity, and deliver better options to consumers,” it adds.
Mass adoption
One of the most promising early use cases for stablecoins, Moffatt says, may come from large retailers issuing their own stablecoins to work around legacy payment networks.
“[Companies] can … bypass the existing payment system, which makes the whole thing lower cost,” he said.
This is not a hypothetical. Companies such as Amazon and Walmart are already exploring issuing their own stablecoins in the U.S. to reduce payment processing costs and improve data tracking.
A Canadian payments framework for stablecoin issuers could also encourage more companies to launch CAD-backed stablecoins. This could further drive down Canadians’ costs of transacting with stablecoins by eliminating foreign exchange costs, Moffatt says.
At present, “[t]here’s a bunch of different steps and intermediaries that are going to take a little bit off the top,” he said.
A stablecoin payments framework would also afford users clearer legal recourse in the event of disputes, says Moffatt.
“An online retailer in Canada might be hesitant to use an American-issued stablecoin because they might be worried that if something goes wrong, they might have issues around legal recourse.
“But using a made-in-Canada [stablecoin] … offers them extra protection.”
Industry reaction
The financial tech industry has welcomed the government’s plan. But firms say Canada must move quickly to avoid falling even further behind other countries that already have robust stablecoin digital asset frameworks in place.
In an emailed press release, Coinbase Canada’s CEO Lucas Matheson called the government’s framework “a step in the right direction.” Coinbase facilitates the trading and custody of cryptocurrencies on its platform.
However, Canada must “go even further … to be a true leader in the digital economy,” said Matheson, who attended the 112th Grey Cup with Prime Minister Mark Carney on Nov. 16.
“[W]e need a clear, unified stablecoin framework, anchored by the Bank of Canada, that avoids fragmented oversight and positions the country to compete globally.”
Moffatt says a well-executed regulatory framework could offer upsides for Canadian consumers and industry.
“ I see [regulation] as creating a safer, more stable environment,” he said.
“And I also see it as a way to make sure that innovators in … Canada’s tech sector [don’t] feel like they have to go to the United States or the EU to operate these companies.”
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