The Liberal 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 move, unveiled in the 2025 budget, is part of the government’s strategy to modernize payments and provide Canadians with more secure and innovative payment options.
According to the budget announcement, the upcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency backed by real currencies or assets like gold, must maintain reserves to mitigate risks and safeguard consumers. Additionally, these issuers will be required to adhere to national security standards to protect the sensitive information of Canadians.
Stablecoins, which have been in existence since 2014 when Tether introduced the first U.S. dollar-tied cryptocurrency, have gained traction over the years. In response to this trend, the U.S. government recently enacted regulatory measures, such as the GENIUS Act, enabling prominent American companies like Walmart to issue stablecoins linked to the U.S. dollar.
To ensure Canada remains competitive in the realm of cryptocurrencies, advocates have been urging the federal government to establish regulations for stablecoins, providing a framework for companies to issue their own Canadian dollar-backed digital assets. While the Bank of Canada abandoned its central bank digital currency project in the previous year, Tetra Digital, a Calgary-based finance firm, has secured $10 million in funding to develop a digital version of the Canadian dollar with support from industry players like Shopify, Wealthsimple, and National Bank.
The budget outlines that the Bank of Canada will incur costs of $10 million over two years starting in 2026-27 to administer the new legislation, funded through government revenues. Additionally, stablecoin issuers subject to the regulatory framework will bear ongoing administrative costs of approximately $5 million annually.
The policy change is expected to bring direct or indirect benefits to men and youth by enhancing prosperity and governance, as stated in the budget. Lucas Matheson, CEO of Coinbase Canada, the country’s largest registered crypto trading platform, views the government’s initiative as a signal that Canada is prepared to lead in digital innovation, foreseeing transformative impacts on how Canadians engage with money and the internet through faster, more affordable, and accessible payments.
As part of the payments modernization plan, amendments to the Retail Payment Activities Act will be made to regulate electronic payment service providers utilizing stablecoins backed by cash for payment transactions. Despite the advantages of stablecoins, which offer ease of trading similar to major cryptocurrencies with reduced volatility, critics raise concerns about the lack of robust security measures present in traditional banking systems to detect and prevent illicit financial activities.
The budget lacks specific details on the nature of “national security safeguards” to combat illegal transactions or the timeline for the introduction of the legislation. Furthermore, the budget allocates $19 million over two years to empower the Bank of Canada in overseeing the Consumer Driving Banking Act, which allows individuals and small businesses to securely share their data with chosen entities.
Additionally, $25.7 million will be directed towards the Canadian Security Intelligence Service and the RCMP to bolster information exchange protections under the act.
