Canada allocates funds to regulate stablecoins in 2025 federal budget

The Canadian Department of Finance unveiled the stablecoin regulation proposal in its 2025 budget plan, which would require all stablecoin issuers to maintain and manage adequate asset reserves with clear redemption policies for the protection of users.  

Canada is set to introduce its first national framework for regulating fiat-backed stablecoins under the 2025 federal budget, according to a proposal shared with lawmakers on Tuesday. The law will also add more privacy protections for Canadians through national-security safeguards for digital financial operations.

The Bank of Canada will set aside $10 million in the 2026–2027 fiscal year and the next one, coupled with an $5 million in annual operating costs covered by fees collected from issuers regulated under the Retail Payment Activities Act.

Canadian stablecoin law proposal inspired by US Genius Act

The proposal did not specify when the legislation would be tabled, but officials familiar with the draft said it was inspired by the United States’ pro-stablecoin Genius Act, Cryptopolitan reported. 

Some naysayers of the legislation are dreadful that the Canadian version does not precisely define what constitutes a stablecoin or which agency will have regulatory authority over the assets.

In the US, stablecoins are categorized as payment instruments, and oversight primarily happens at the federal level. In Canada, however, digital assets like Bitcoin and stablecoins are treated as securities, regulated by provinces and territories. Since stablecoins are also payment instruments similar to cash or credit, they fall partly under federal authority. 

The dual characterization has created regulatory uncertainty and confusion for companies and consumers within Canadian borders.

Ron Morrow, the Bank of Canada’s executive director of payments, said in a speech at a September conference in Ottawa that governments are moving quickly to regulate stablecoins to protect consumers and market stability.

“Governments are moving to regulate stablecoins and other cryptocurrencies so consumers can reap their benefits and be protected from credit and liquidity risk,” Morrow said.

However, some economists believe Canada will fall behind its peers if its approach diverges too far from international standards.

“If the Canadian approach to stablecoins is not harmonized with the American and international approaches, this will isolate Canada from the international payment stablecoins ecosystem. Canadians will have to use foreign-issued stablecoins within the Canadian economy, impacting monetary policy and sovereignty,” said Mohammed Muraj, a partner at a top Canadian law firm specializing in blockchain and fintech.

Canada’s market is ripe for a digital currency economy

Canada’s push to regulate stablecoins comes as domestic companies continue expanding their blockchain-based services. In June, Shopify launched a stablecoin payment option for merchants through partnerships with Coinbase and Stripe, allowing Canadian businesses to accept blockchain-based payments directly.

Calgary-based Tetra Digital raised $10 million in early September to develop a stablecoin backed by the Canadian dollar in 2026, with support from investors including Shopify, Wealthsimple, and the National Bank of Canada.

Another Calgary startup, Loon, secured $3 million in pre-seed financing and already launched its own stablecoin earlier this year.

Canada was one of the first countries to introduce anti-money laundering rules for crypto in 2014, setting a precedent for global compliance standards. Galaxy Digital, the asset management firm founded by billionaire investor Mike Novogratz, chose to list in Canada rather than the US due to friendlier regulatory conditions. 

The firm, headquartered in New York, launched its shares on the Nasdaq in May this year after being among the first financial entities to issue spot bitcoin exchange-traded funds, the Invesco Galaxy Bitcoin ETF (BTCO).

Carolyn Wilkins, a former senior deputy governor at the Bank of Canada, wrote recently that Canada must create a legal foundation that “builds trust, security, stability and competitiveness of modern Canadian dollar payments.” She noted that the US’s Genius Act had put “wind in the sails of payments innovation,” and Canada should respond in kind.

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