Canada Unveils Plan to Regulate Stablecoins in 2025 Federal Budget

• Canada to regulate stablecoins under the 2025 budget with reserves, redemption policies, and risk management.
• The Bank of Canada will allocate $10 million for stablecoin regulation; issuers will cover $5 million annually.
• The stablecoin market is valued at $311 billion, with a projected $2 trillion by 2028, boosting digital payments.

The government of Canada has proposed that it regulate fiat-backed stablecoins within its federal budget in 2025. The new rules will involve stablecoin issuers holding enough reserves, having redemption policies, and putting up stringent risk management policies. This step is coming after the United States enacted its own landmark regulations regarding stablecoins in July.

Canada will have to ensure that the issuers of stablecoins have sufficient reserves to support their tokens under the new rules. Moreover, they should have effective redemption policies and risk management models in place to protect personal and financial information. 

The actions are part of a larger initiative of modernization of the payment systems in Canada, which has eased the burden on the 41.7 million Canadians by making digital transactions quicker, cheaper, and more secure.

Canada Allocates $10 Million for Stablecoin Regulation

The Bank of Canada will give out $10 million in two years, beginning in the 2026-2027 fiscal year, to assist in the implementation and management of the new regulations. Stablecoin issuers will partially cover the cost and will fall under the Retail Payment Activities Act. It is projected that the expenses of operating the system will amount to $5 million per year, which will also be financed by the issuers of the stablecoins.

The action follows almost four months after the enactment of the United States’ GENIUS Act, which is a law governing stablecoins. This move put Canada under pressure to set its own regulations in the dynamic market.

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Although no timeline has been provided for the new Canadian legislation, it is part of a broader strategy to improve existing payment systems and enhance the security of digital transactions in the country.

Stablecoin Market Hits $311 Billion, Poised to Reach $2 Trillion by 2028

Canada Coinbase CEO Lucas Matheson said he would be highly supportive of the proposal. He added that it would transform the way Canadians use money and the internet forever, and the effects of this on the digital economy of Canada are enormous.

The market of stablecoins is now worth up to $311 billion, and the U.S. Treasury forecasts that it will reach up to $2 trillion by 2028. Large organizations such as Western Union, MoneyGram, SWIFT, and Zelle are increasingly incorporating the solutions of stablecoins into their services.

Tetra Digital, one of the largest companies in the market of stablecoins in Canada, raised 10 million dollars to create a digital version of the Canadian dollar. Shopify, Wealthsimple, and the National Bank of Canada have invested in the project.

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