The Canadian government has pledged to introduce fresh legislation aimed at ensuring the security and stability of certain digital currencies for the benefit of consumers and businesses. This initiative, unveiled in the 2025 budget, is a crucial part of the government’s strategy to modernize payments, with the goal of offering more secure and innovative payment solutions to Canadians.
According to the budget announcement, the upcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency pegged to real currencies or commodities like gold, must maintain asset reserves to mitigate risks and safeguard consumers. Additionally, issuers will be required to adhere to national security standards to safeguard sensitive personal information of Canadians.
Stablecoins have been in existence since 2014, originating from U.S. company Tether’s launch of the first stablecoin tied to the U.S. dollar. Several other companies have since introduced stablecoins, some of which have faced significant challenges.
In a bid to keep Canada competitive in the cryptocurrency space, advocates have been urging the federal government to regulate stablecoins, providing a framework for companies to issue their own Canadian dollar-backed crypto. Despite the Bank of Canada discontinuing its central bank digital currency project last year, Calgary-based finance firm Tetra Digital has secured $10 million to develop a digital rendition of the Canadian dollar, supported by key players like Shopify, Wealthsimple, and National Bank.
The budget outlines that the Bank of Canada will incur a $10 million cost over a two-year period starting in 2026-27 to administer the new legislation, funded through government revenues. Ongoing administration costs of approximately $5 million annually will be borne by stablecoin issuers regulated under the legislative framework.
The government asserts that the policy change will directly or indirectly benefit men and youth by enhancing prosperity and good governance. Lucas Matheson, CEO of Coinbase Canada, lauded the government’s initiative, emphasizing that it positions Canada as a frontrunner in digital innovation. He highlighted the transformative impact stablecoins will have on enhancing payment efficiency and accessibility for Canadians.
As part of the payments modernization plan, the Retail Payment Activities Act will be revised to oversee electronic payment service providers utilizing cash-backed stablecoins for transactions. Stablecoins offer the advantage of easy trading akin to major cryptocurrencies while mitigating volatility. However, critics caution about potential security vulnerabilities compared to traditional banking systems in detecting illicit financial activities.
The budget does not elaborate on the specifics of the “national security safeguards” intended to prevent illegal transactions, nor does it provide a timeline for the legislation’s introduction. Additionally, the budget allocates $19 million over two years to the Bank of Canada for overseeing the Consumer Driving Banking Act, enacted in 2024, enabling safe data sharing for individuals and small businesses.
Furthermore, the budget earmarks $25.7 million for the Canadian Security Intelligence Service and the RCMP to bolster information exchange safeguards under the act.