The Canadian government has announced plans to introduce new legislation aimed at ensuring the security and stability of certain digital currencies for use by consumers and businesses. This initiative, part of the government’s payments modernization strategy outlined in the 2025 budget, aims to provide Canadians with more secure and innovative payment options.
The upcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency backed by real currencies or commodities like gold, maintain asset reserves to mitigate risks and safeguard consumers. Additionally, these issuers will be required to adhere to national security standards to protect sensitive personal information of Canadians.
Stablecoins have been in existence since 2014, with the pioneering U.S. company Tether launching the first U.S. dollar-tied cryptocurrency. Following suit, other companies have introduced stablecoins, some of which have experienced significant fluctuations.
In a bid to keep pace with advancements in the cryptocurrency realm, advocates have been urging the Canadian government to regulate stablecoins, allowing companies to issue their own Canadian dollar-backed cryptocurrencies. Despite the Bank of Canada discontinuing its central bank digital currency project last year, Calgary-based finance company Tetra Digital, with support from Shopify, Wealthsimple, and National Bank, has secured funding to develop a digital version of the Canadian dollar.
The budget outlines that the Bank of Canada will incur a $10 million cost over two years starting in 2026-27 to administer the legislation, funded by government revenues. Furthermore, stablecoin issuers subject to the new regulatory framework will bear approximately $5 million in annual administration costs.
The policy change is anticipated to have a positive impact on prosperity and good governance, directly or indirectly benefiting men and youth. Lucas Matheson, CEO of Coinbase Canada, lauded the government’s initiative as a signal that Canada is poised to lead in digital innovation, foreseeing transformative changes in how Canadians engage with money and the internet.
As part of the payments modernization plan, amendments to the Retail Payment Activities Act will regulate electronic payment service providers utilizing cash-backed stablecoins for transactions. Stablecoins offer the advantage of easy trading akin to major cryptocurrencies while mitigating volatility, although critics highlight their potential security vulnerabilities compared to traditional banking systems.
While the budget does not elaborate on specific national security measures against illicit transactions or the legislation’s timeline, it allocates $19 million to the Bank of Canada for overseeing the Consumer Driving Banking Act. This act, enacted in 2024, enables individuals and small businesses to securely share their data with chosen entities.
Moreover, the budget earmarks $25.7 million for the Canadian Security Intelligence Service and the RCMP to bolster information exchange safeguards under the act.