The Canadian government has made a commitment to introduce new legislation to ensure the security and stability of certain digital currencies for the benefit of consumers and businesses. This initiative, unveiled in the 2025 budget, is part of the government’s plan for modernizing payments to 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 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 sensitive personal information of Canadians.
Stablecoins have been in existence since 2014, with the first of its kind, a cryptocurrency pegged to the U.S. dollar, introduced by U.S. company Tether. Subsequently, other companies have launched stablecoins, some of which have encountered failures. The U.S. government passed regulatory legislation, known as the GENIUS Act, in the previous summer, enabling major American corporations like Walmart to issue stablecoins supported by the U.S. dollar.
Concerns have been raised about Canada potentially lagging behind in the realm of cryptocurrencies, prompting urgent calls for the federal government to regulate stablecoins. This regulation is seen as essential for companies to have a structured framework for issuing their own Canadian dollar-backed cryptocurrencies. 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 to develop a digital rendition of the Canadian dollar with the backing of Shopify, Wealthsimple, and National Bank.
The budget outlines that the Bank of Canada will incur $10 million in administering the legislation over two years starting in 2026-27, funded by government revenues. Furthermore, stablecoin issuers subject to the new legislative framework will bear ongoing annual administration costs of approximately $5 million. The policy change is expected to directly or indirectly enhance prosperity and good governance for men and youth, as stated in the budget.
Lucas Matheson, CEO of Coinbase Canada, the largest registered crypto trading platform in the country, views the government’s action as a signal of Canada’s readiness to lead in digital innovation. He believes that the news will revolutionize how Canadians engage with money and the internet, making payments faster, cheaper, and more accessible for everyone.
As part of the payments modernization plan, the Retail Payment Activities Act will be amended to regulate electronic payment service providers utilizing cash-backed stablecoins for payment facilitation. Stablecoins offer the advantage of easy trading similar to major cryptocurrencies while mitigating some of the volatility. Nonetheless, critics highlight the absence of certain security measures present in banks to detect and prevent illicit financial activities.
The budget does not specify the exact details of the “national security safeguards” to prevent illegal transactions or the timeline for tabling the legislation. Additionally, the budget allocates $19 million over two years to the Bank of Canada for overseeing the Consumer Driving Banking Act, which permits individuals and small businesses to securely share their data with chosen entities. Moreover, $25.7 million is earmarked for the Canadian Security Intelligence Service and the RCMP to support information exchange safeguards under the act.