The Liberal government has announced its commitment to introducing new legislation aimed at ensuring the security and stability of certain digital currencies for the benefit of consumers and businesses. This initiative, unveiled in the 2025 budget, forms part of the government’s plan for modernizing payments to provide Canadians with more secure and innovative payment options.
The upcoming legislation will mandate that issuers of stablecoins, a type of cryptocurrency pegged to real currencies or commodities like gold, maintain asset reserves to mitigate risks and safeguard consumers. Additionally, these issuers will need to adhere to national security standards to protect the sensitive personal information of Canadians.
Originating in 2014 with the launch of the first stablecoin by U.S.-based company Tether, stablecoins have since proliferated, with some encountering significant challenges. The U.S. government recently passed regulatory legislation, such as the GENIUS Act, enabling prominent American companies to issue stablecoins backed by the U.S. dollar.
Concerns about Canada potentially lagging in the realm of cryptocurrencies have prompted calls for federal regulation of stablecoins to establish a framework for companies to issue their own Canadian dollar-backed digital currencies. While the Bank of Canada abandoned its central bank digital currency project last year, Tetra Digital, a Calgary-based finance company, has secured $10 million in funding to develop a digital version of the Canadian dollar with support from Shopify, Wealthsimple, and National Bank.
The budget outlines that the Bank of Canada will incur an administration cost of $10 million over two years starting in 2026-27, funded by government revenues. Subsequently, stablecoin issuers subject to the new legislative framework will bear ongoing annual administration costs of approximately $5 million. The policy shift is expected to directly or indirectly benefit men and youth by enhancing prosperity and governance.
Lucas Matheson, CEO of Coinbase Canada, commended the government’s action as a signal of Canada’s readiness to lead in digital innovation. He highlighted the transformative impact stablecoins could have on the accessibility and efficiency of payments for Canadians.
As part of the payment modernization strategy, the Retail Payment Activities Act will be amended to regulate electronic payment service providers utilizing stablecoins backed by cash for transactions. While stablecoins offer ease of trading akin to major cryptocurrencies with reduced volatility, critics caution about their potentially weaker security measures compared to traditional banks.
The budget does not specify the nature of the “national security safeguards” to prevent illicit transactions or provide a timeline for the legislation’s introduction. Furthermore, it allocates $19 million to the Bank of Canada over two years to oversee the Consumer Driving Banking Act, facilitating secure data sharing for individuals and small businesses. Additionally, $25.7 million will support information exchange safeguards under the act for the Canadian Security Intelligence Service and the RCMP.
