The Liberal government is set to introduce new legislation aimed at enhancing the security and stability of digital currencies for consumers and businesses. This initiative, unveiled as part of the 2025 budget, is a key element of the government’s broader payments modernization strategy, which seeks to provide more secure and innovative payment solutions for Canadians.
According to the budget, the upcoming legislation will impose requirements on issuers of stablecoins—cryptocurrencies pegged to real-world assets such as fiat currencies or commodities like gold. Specifically, these issuers will need to maintain appropriate asset reserves to mitigate risks and safeguard consumer interests. Additionally, the law will mandate that issuers adhere to national security standards designed to protect Canadians’ sensitive and personal information.
Stablecoins have been a presence in the cryptocurrency landscape since 2014, following the launch of Tether, the first stablecoin closely tied to the U.S. dollar. Despite the stability these digital currencies aim to provide, the market has seen several issuers fail over time. In contrast, the U.S. government passed regulatory legislation this summer which allows major corporations, such as Walmart, to issue stablecoins backed by the U.S. dollar through the GENIUS Act.
The move to regulate stablecoins in Canada comes in response to growing concerns that the country may be lagging behind in the cryptocurrency sector. Advocates for regulatory measures argue that a clear framework would empower Canadian companies to issue their own stablecoins backed by the Canadian dollar. Although the Bank of Canada previously suspended its central bank digital currency project, Calgary-based Tetra Digital recently raised $10 million to develop a digital version of the Canadian dollar, bolstered by support from notable firms like Shopify and Wealthsimple.
Financial implications of the new legislation include a projected $10 million budget for the Bank of Canada to oversee implementation starting in the fiscal year 2026-27, funded through government revenues. Furthermore, ongoing operational costs estimated at $5 million per year will be borne by the regulated stablecoin issuers.
The budget outlines a commitment to inclusivity, stating that this policy change will have direct or indirect benefits for men and youth, contributing to prosperity and better governance. Expressing optimism about the potential impact of the legislation, Lucas Matheson, CEO of Coinbase Canada, remarked that the move indicates a commitment to digital innovation in Canada. He emphasized that stablecoins could fundamentally transform how Canadians manage transactions, making them faster, cheaper, and more accessible.
As part of the payments modernization plan, the Retail Payment Activities Act will be revised to impose regulations on electronic payment service providers utilizing cash-backed stablecoins. While stablecoins offer the ease of trading comparable to major cryptocurrencies, critics caution that they might lack the robust security measures typical of traditional banks to prevent illicit financial activities.
Although the budget mentions national security safeguards to guard against illegal transactions, it does not specify what these protections will entail, nor does it provide a timeline for when the legislation will be presented. Additionally, the budget allocates $19 million over two years to the Bank of Canada to oversee the Consumer Driving Banking Act, which allows individuals and small businesses to securely share their data with selected entities. It also designates $25.7 million to the Canadian Security Intelligence Service and the RCMP to bolster information-sharing safeguards under this act.
