Canada to Regulate Stablecoins Under New Federal Budget

By: Eliza Bennet

In a significant policy decision mirroring trends in the United States, Canada is gearing up to regulate fiat-backed stablecoins through its newly unveiled federal budget for 2025. This move is part of a broader strategy to ensure that digital currencies are issued and used within a secure and well-regulated framework.

Under the proposed regulations, stablecoin issuers will be mandated to maintain adequate reserves and adopt rigorous risk management measures. These measures are aimed at safeguarding users' personal and financial information, establishing clear redemption policies, and ensuring the credibility of the stablecoin market. In addition, issuers will be required to comply with the provisions outlined in the Retail Payment Activities Act.

The Bank of Canada will play a pivotal role in this regulatory framework, allocating around $10 million over two years starting in the 2026-2027 fiscal year. These funds will be used to ensure that the regulatory infrastructure is robust and effective. Subsequently, the Bank is expected to incur an annual regulatory oversight cost of $5 million, which will be covered by fees levied on the stablecoin issuers.

This initiative positions Canada alongside the United States, which has already passed significant stablecoin regulation, underscoring the growing global emphasis on creating secure digital financial ecosystems. As the landscape for blockchain technology and digital currencies continues to evolve, Canada's efforts to implement sound stablecoin regulations could serve as a model for other countries navigating the complexities of integrating digital currencies into their traditional financial systems.