The Canadian government has pledged to introduce new legislation aimed at ensuring the security and stability of certain digital currencies for the benefit of consumers and businesses. This initiative, revealed in the 2025 budget, forms part of the government’s strategy to modernize payments, promising enhanced and secure payment solutions for Canadians.
The forthcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency pegged to real currencies or commodities such as 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, which have been in existence since 2014 when U.S. company Tether introduced the first U.S. dollar-backed cryptocurrency, have garnered attention globally. Several companies have since launched their own stablecoins, with some facing significant challenges.
In a bid to keep pace with cryptocurrency developments, advocates have been urging the Canadian government to regulate stablecoins, allowing companies to issue their own Canadian dollar-backed digital assets. While the Bank of Canada shelved its central bank digital currency project, Tetra Digital, a Calgary-based finance firm, has secured funding to develop a digital version of the Canadian dollar with support from notable entities 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 from 2026-27, funded by government revenues. The ongoing annual administrative expenses of approximately $5 million will be borne by stablecoin issuers regulated under the new legislative framework.
The policy shift is expected to directly or indirectly benefit men and youth by fostering prosperity and good governance. Lucas Matheson, CEO of Coinbase Canada, the country’s leading registered crypto trading platform, views the government’s action as a testament to Canada’s readiness to lead in digital innovation. He believes that the adoption of stablecoins will revolutionize payment systems, making transactions faster, cheaper, and more accessible.
As part of the payments modernization plan, amendments will be made to the Retail Payment Activities Act to oversee electronic payment service providers utilizing cash-backed stablecoins for transactions. While stablecoins offer ease of trading similar to major cryptocurrencies with reduced volatility, critics highlight the lack of robust security measures present in traditional banking systems to combat illicit financial activities.
The budget does not elaborate on the specifics of the “national security safeguards” to prevent unlawful transactions or provide a timeline for the legislation’s introduction. Furthermore, the budget allocates $19 million to the Bank of Canada over two years to supervise the Consumer Driving Banking Act, enabling individuals and small businesses to securely share their data with chosen entities.
Moreover, $25.7 million is earmarked in the budget to support the Canadian Security Intelligence Service and the RCMP in enforcing information exchange protocols under the act.