The Canadian government has announced plans to introduce new legislation aimed at ensuring the security and stability of certain digital currencies for consumer and business use. This initiative, revealed in the 2025 budget, is part of the government’s strategy to modernize payments and provide Canadians with more secure and innovative payment options.
The upcoming legislation will mandate that issuers of stablecoins, a type of cryptocurrency backed by real currencies or commodities such as gold, maintain asset reserves to mitigate risks and safeguard consumers. Additionally, issuers will be required to adhere to national security standards to protect the sensitive personal information of Canadians.
Stablecoins, which have been in existence since 2014 when U.S. company Tether introduced the first U.S. dollar-tied cryptocurrency, have gained traction over the years with the launch of similar offerings. The U.S. government enacted regulatory legislation, including the GENIUS Act, permitting major American companies like Walmart to issue stablecoins pegged to the U.S. dollar.
Amid concerns about Canada lagging in the cryptocurrency space, stakeholders have urged the government to regulate stablecoins to provide a framework for companies to issue their own Canadian dollar-backed digital currencies. While the Bank of Canada halted its central bank digital currency project last year, Calgary-based Tetra Digital has secured $10 million 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 $10 million in administrative costs over a two-year period starting in 2026-27, funded by government revenues. Ongoing system administration costs of approximately $5 million annually will be covered by regulated stablecoin issuers under the new legislative framework. The policy change is expected to directly or indirectly benefit men and youth by enhancing prosperity and governance.
Lucas Matheson, CEO of Coinbase Canada, commended the government’s actions, indicating that Canada is poised to lead in digital innovation. He anticipates that stablecoins will revolutionize payment processes, making them faster, more cost-effective, and widely accessible. As part of the payments modernization plan, the Retail Payment Activities Act will be revised to regulate electronic payment service providers utilizing cash-backed stablecoins for transactions.
While stablecoins offer ease of trading akin to major cryptocurrencies and mitigate volatility, critics highlight the potential security vulnerabilities compared to traditional banking systems in detecting and preventing illicit financial activities. Details on the implementation of “national security safeguards” and the legislative timeline are yet to be disclosed in the budget.
Furthermore, the budget allocates $19 million to the Bank of Canada over two years to oversee the Consumer Driving Banking Act, enabling individuals and small businesses to securely share their data with chosen entities. Additionally, $25.7 million is earmarked for the Canadian Security Intelligence Service and the RCMP to support information exchange protections under the act.