Canada pivots to stablecoins as cornerstone of its digital payments reform

The Bank of Canada will oversee the framework, allocating CA$10 million initially and CA$5 million annually.
The Retail Payment Activities Act will be amended to include stablecoin-related payment services.
Canada’s reforms align with similar regulatory frameworks in the UK, EU and Australia.

Canada’s 2025 federal budget, unveiled on 4 November, places fiat-backed stablecoins at the centre of its plan to modernise the national payments system.

The initiative signals a clear policy shift from research on central bank digital currencies toward regulating private digital assets within the country’s financial framework.

By introducing detailed rules around issuance, redemption and oversight, the government aims to make stablecoins secure, transparent and suitable for daily transactions while safeguarding financial stability.

The Bank of Canada will oversee the framework and integrate stablecoins into the Retail Payment Activities Act.

A regulated path for fiat-backed stablecoins

Under the new framework, issuers will be required to maintain adequate reserves, establish risk management systems and comply with data protection standards.

The legislation also includes national security provisions to uphold the integrity of the financial system and protect consumers.

The Bank of Canada will allocate CA$10 million over two years starting in 2026 to administer the framework, with annual operating costs of CA$5 million to be recovered from regulated issuers.

Amendments to the Retail Payment Activities Act (RPAA) will bring payment service providers handling stablecoin transactions under formal supervision.

Introduced in 2021, the RPAA already regulates both domestic and foreign payment firms in Canada. Its expansion to cover stablecoin use reflects the government’s intention to fold digital currencies into the existing financial oversight structure.

From central bank currency to private innovation

The move marks a turning point in Canada’s digital currency policy. In September 2024, the central bank decided against launching a retail central bank digital currency and shifted its focus to analysing global payment trends.

That decision created a gap that the new stablecoin legislation now addresses.

Officials have acknowledged that reform in Canada has been slower than in other major economies.

The Bank of Canada’s Executive Director of Payments, Ron Morrow, previously cautioned that Canada could fall behind the United Kingdom, Australia and the European Union, all of which already have digital asset frameworks.

By regulating rather than issuing digital assets, Canada is adopting a hybrid model that allows private innovation while maintaining government supervision. This approach is intended to encourage payment innovation without compromising oversight.

Building a modern and secure payment system

The stablecoin framework forms part of a broader payments modernisation plan.

Alongside it, the government plans to advance consumer-driven banking, open data mobility and the Real-Time Rail system, which is expected to enable instant fund transfers by 2026.

For consumers, the reforms promise faster and more reliable transactions and may lower the cost of cross-border payments. For issuers and payment providers, the challenge lies in meeting new compliance requirements while remaining competitive.

The legislation’s emphasis on privacy and national security also signals the government’s intention to build public trust in digital finance as it becomes a mainstream part of the economy.

Toward a digitally integrated financial system

The new stablecoin rules complement existing crypto regulations in Canada, which already require strict compliance from exchanges and trading platforms.

Several major international firms have withdrawn from the market in recent years, citing complex regulatory demands.

In addition, the Crypto-Asset Reporting Framework, coming into effect in 2026, will compel crypto service providers to report client and transaction data to tax authorities.

Together, these developments reflect a strategic shift in how Canada views digital finance. By replacing experimental central bank projects with clear regulation, the government is laying the foundation for a secure and inclusive digital economy.