Canada to Regulate Stablecoins in 2025 Budget

The new legislation establishes rigorous requirements for stablecoin issuers operating within Canada’s borders. According to the budget documents, issuers will be mandated to maintain and manage adequate asset reserves, establish clear redemption policies, implement comprehensive risk management frameworks, and protect the sensitive personal information of Canadian users. The framework also includes national security safeguards designed to ensure that fiat-backed stablecoins remain safe and secure for both consumers and businesses. These measures aim to address longstanding concerns about transparency and stability in the digital asset space while fostering greater public confidence.

To oversee this new regulatory regime, the Bank of Canada will retain $10 million over two years starting in 2026-27 from its remittances to the federal treasury. Administrative costs beyond this initial period are projected at $5 million annually, which will be offset by fees collected from regulated issuers. Related amendments to the Retail Payment Activities Act will extend regulatory supervision to payment providers that utilize stablecoins, creating a comprehensive oversight structure that covers both issuance and payment processing aspects of the stablecoin ecosystem.

Canada’s regulatory move places it among a growing list of jurisdictions establishing formal rules for stablecoins. The United States passed the GENIUS Act earlier this year, while Hong Kong and the European Union have rolled out their own regulatory frameworks. This global trend reflects the increasing significance of stablecoins in the digital finance landscape, with Tether (USDT) and Circle (USDC) dominating a market where over 90% of fiat-backed stablecoins are pegged to the U.S. dollar.

The timing of Canada’s regulatory initiative coincides with explosive growth in stablecoin usage. According to data from TRM Labs, stablecoins now account for about 30% of all crypto transactions globally, with volume exceeding $4 trillion between January and August 2025. This represents an 83% increase from the same period a year earlier, underscoring the urgent need for regulatory clarity. The question remains whether these regulatory steps will spur mainstream adoption or simply mark another high point in the recurring cycle of crypto hype, similar to previous technologies like NFTs that initially generated significant excitement before fading from prominence.

Industry groups have largely applauded the government’s announcement, viewing it as a crucial step toward legitimizing digital assets in Canada. The Canadian Web3 Council told Decrypt it welcomed the budget measure as “Canada’s answer to the U.S. GENIUS Act.” Morva Rohani, the council’s executive director, stated that the legislation establishes “a pathway for qualified innovators to issue fiat-backed stablecoins under federal oversight.” The council believes the government’s commitment could foster competition in payments and reduce transaction costs, addressing concerns raised by Ron Morrow, Executive Director of Payments, Supervision and Oversight at the Bank of Canada, who noted that cross-border transfer costs remain far higher in Canada than in peer countries.

Canadian crypto firm Shakepay also praised the move, with a spokesperson calling it a “big step forward for fintech and digital payments in Canada.” The spokesperson emphasized that “We’ve been pushing for this kind of clarity for years at Shakepay, and it’s great to see real progress. Now the focus turns to implementation: making sure the framework stays open, proportional, and accessible, so fintechs can help build the next generation of trusted payment rails for Canadians.” However, the Canadian Web3 Council cautioned that overlapping regulations could disadvantage Canadian firms compared to their American counterparts, highlighting the need for careful implementation to ensure competitive parity.

While stablecoins have gained significant backing from industry participants, concerns about their potential risks persist. The Bank for International Settlements has warned that stablecoins could undermine monetary sovereignty, present transparency issues, and risk capital flight from developing countries. The institution has also highlighted the fragility of stablecoins’ peg to fiat currency, noting that maintaining this peg requires robust reserve management and operational integrity.

The momentum for stablecoin regulation in Canada has been building for months. In September, Ron Morrow of the Bank of Canada called for national regulation of stablecoins, warning that Canada lagged behind peers like the U.S. and U.K. in modernizing its payments infrastructure. The new framework represents a significant step toward addressing this gap, though its ultimate success will depend on effective implementation and ongoing adaptation to market developments. As Canada joins other major jurisdictions in establishing clear rules for digital assets, the world will be watching to see whether this regulatory clarity can balance innovation with stability in the rapidly evolving digital finance landscape.