Canada Moves to Regulate Stablecoins in 2025 Budget
Canada’s federal government has announced plans to introduce stablecoin regulations as part of its 2025 federal budget, aiming to modernize the nation’s financial system and foster innovation in digital payments.
According to the budget released on November 4, the legislation will establish a regulatory framework for fiat-backed stablecoins, including rules for issuance, redemption, and oversight. The move represents a major policy shift, as Canada pivots from earlier discussions about launching a central bank digital currency (CBDC) toward supporting private-sector digital assets under strict regulation.
The new framework will require stablecoin issuers to maintain adequate asset reserves, implement risk management protocols, and ensure data protection to safeguard users and maintain financial stability.
An excerpt from the budget reads:
“The legislation will also include national security safeguards to support the integrity of the framework so that fiat-backed stablecoins are safe and secure for consumers and businesses.”
Bank of Canada to Oversee New Framework
To support implementation, the Bank of Canada will receive $10 million over two years starting in 2026, with ongoing annual costs of about $5 million, to be recovered from regulated stablecoin issuers.
The government also plans to amend the Retail Payment Activities Act (RPAA) to bring payment service providers handling stablecoin transactions under regulatory supervision. Introduced in 2021, the RPAA governs both domestic and foreign payment operators, ensuring security, competitiveness, and compliance with national security standards.
The decision comes as other major economies such as the United States, European Union, and Australia advance their own digital asset regulatory frameworks. Canadian regulators aim to ensure that stablecoins can be safely used for everyday payments, aligning domestic policy with global developments.
Canada Shifts Away from Central Bank Digital Currency
Canada’s move toward stablecoin regulation follows the cancellation of its CBDC plans in September 2024. The Bank of Canada previously explored developing a digital currency to serve as a public alternative to private stablecoins but ultimately decided to focus on analyzing broader payment trends instead.
Officials cited the need for flexibility and coordination with international standards as reasons for shifting focus.
In a statement last month, Ron Morrow, Executive Director of Payments at the Bank of Canada, warned that the country risks falling behind global peers in digital finance innovation.
“The pace of change here in Canada has been gradual. Other major jurisdictions like the United Kingdom, Australia, and the European Union have already embraced change,” he said.
Canada’s Crypto Regulatory Landscape
Canada already enforces one of the most stringent regulatory regimes for cryptocurrency exchanges and trading platforms. However, many major global exchanges have exited the market, citing complex compliance requirements and regulatory uncertainty.
The Crypto-Asset Reporting Framework, set to take effect in 2026, will further increase transparency by requiring crypto service providers to report transaction and client data to tax authorities.
Analysts suggest that the new stablecoin legislation could mark a turning point for Canada’s digital finance sector, providing clarity while encouraging innovation under strict oversight.
