Synopsis: Canada’s 2025 federal budget authorizes a new policy regulating fiat-backed stablecoins, overseen by the Bank of Canada. It mandates one-to-one reserves, immediate redemption, and prohibits non-bank issuers from offering yields, aiming for secure, stable digital currency use.
Canada’s government has narrowly passed its federal budget, which includes a landmark policy to regulate stablecoins, marking a major step in the country’s digital currency space.
This development, spearheaded under Prime Minister Mark Carney’s first budget, signals a new era in Canada’s approach to cryptocurrency regulation and digital payments. The approved policy places stablecoin issuance under the oversight of the Bank of Canada, reflecting a commitment to innovation alongside increased security in the financial sector.
Stablecoin Regulation
Within the budget, a detailed section establishes regulatory standards for fiat-backed stablecoins cryptocurrencies pegged to traditional currencies like the Canadian dollar (CAD).
Issuers of stablecoins must now maintain one-to-one reserves backed exclusively by the reference currency or other high-quality liquid assets. Immediate redemption at par value must also be guaranteed for stablecoin holders, ensuring cash-like usability. These issuers, supervised by the Bank of Canada, must comply with rigorous risk management, cybersecurity mandates, and transparent disclosures to protect consumers and the financial system.
Importantly, non-bank stablecoin issuers are prohibited from offering any form of interest or yields on their tokens, a restriction aimed at reducing systemic risk and preventing stablecoins from becoming unregulated investment vehicles. This cautious regulatory stance contrasts with approaches in other jurisdictions, underlining Canada’s focus on financial stability while fostering digital innovation.
Parliamentary Approval with Industry Reactions
The budget’s passage in Parliament was tight, with a final vote of 170-162, reflecting the contentious nature of crypto regulation in a minority government setting. Support from some New Democratic Party members helped secure this narrow victory.
After the approval, Coinbase Canada’s CEO, Lucas Matheson, described the policy as a “step in the right direction” but called for faster market access for CAD-denominated stablecoins. He also suggested allowing issuers to share yield on stablecoin deposits to keep Canada competitive globally and preserve the Canadian dollar’s influence.
Carney’s government appears committed to pushing the digital payments agenda further. The Prime Minister even publicly shared the stage with Matheson during a national football event, signaling a public endorsement of crypto innovation.
The global stablecoin market is dominated by US dollar-pegged tokens, but Canada’s new framework aims to grow the presence of Canadian dollar-pegged stablecoins, enhancing the country’s position in the global digital economy.
Canadian Finance
The new stablecoin provisions are part of a broader government plan to modernize Canada’s financial landscape. Besides stablecoins, the budget focuses on advancing open banking, cybersecurity, and real-time payment systems initiatives that support a more inclusive and competitive financial sector.
While the budget still needs Senate approval and royal assent, experts expect smooth passage given the urgency of economic recovery and innovation strategies. The Bank of Canada will maintain a registry of approved stablecoin issuers and impose sanctions for non-compliance, ensuring high standards are met.
Canada’s approach closely mirrors emerging regulations in other leading economies but opts for a more conservative stance on yields. This policy balances prudence and progress, positioning Canada to lead in the evolving “digital dollar era” and potentially reshape how Canadians use money in everyday transactions.
Overall, Canada’s new budget marks a significant milestone toward integrating digital currencies safely into the national economy, demonstrating leadership in global crypto regulation and financial innovation.
Written By Fazal Ul Vahab C H
