The Canadian government has unveiled plans to introduce new laws aimed at ensuring the stability and security of certain digital currencies for widespread consumer and business use. This initiative, outlined in the 2025 budget, is part of the government’s efforts to modernize payments and provide Canadians with more secure and innovative payment options.
According to the budget announcement, the upcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency backed by real assets like traditional currencies or commodities such as gold, maintain sufficient asset reserves to mitigate risks and safeguard consumers. Additionally, these issuers will be required to adhere to national security standards to safeguard sensitive information belonging to Canadians.
Stablecoins, which have been in existence since 2014 when Tether introduced the first U.S. dollar-tied cryptocurrency, have garnered attention for their potential impact on the financial landscape. Following the U.S. government’s regulatory efforts with the GENIUS Act, which paved the way for American companies like Walmart to issue stablecoins backed by the U.S. dollar, there has been a growing urgency in Canada to regulate stablecoins to keep pace with global developments.
Despite the Bank of Canada pausing its central bank digital currency project, Tetra Digital, a Calgary-based financial firm with support from companies like Shopify, Wealthsimple, and National Bank, has raised funds to develop a digital version of the Canadian dollar. The budget outlines that the Bank of Canada will incur $10 million in administrative costs over two years, starting in 2026-27, funded by government revenues. Ongoing annual costs of approximately $5 million to administer the new regulatory framework will be borne by stablecoin issuers.
The budget emphasizes that the policy change is expected to directly or indirectly benefit men and youth by enhancing prosperity and governance. Lucas Matheson, CEO of Coinbase Canada, lauded the government’s move as a signal of Canada’s readiness to lead in digital innovation, highlighting the transformative potential of stablecoins in making payments quicker, more cost-effective, and accessible to all.
As part of the payments modernization plan, amendments to the Retail Payment Activities Act will govern electronic payment service providers utilizing stablecoins backed by traditional currencies for transactions. While stablecoins offer ease of trading akin to major cryptocurrencies with reduced volatility, critics caution about potential security vulnerabilities compared to traditional banking infrastructure in detecting and preventing illicit financial activities.
The budget does not specify the exact nature of the national security measures to prevent illegal transactions or the timeline for introducing the legislation. Furthermore, the Bank of Canada will receive $19 million over two years to oversee the Consumer Driving Banking Act, allowing individuals and small businesses to securely share their data with chosen entities. Additionally, $25.7 million will be allocated to the Canadian Security Intelligence Service and the RCMP to support information exchange safeguards under the act.
