Canada’s 2025 Budget: First Fiat-Backed Stablecoin Regulation
Canada’s Department of Finance, in its 2025 federal budget, has proposed the country’s first national regulation framework for fiat-backed stablecoins. The plan mandates issuers to hold full asset reserves, establish clear redemption policies, and adopt robust risk management, data protection and privacy safeguards. To oversee implementation, the Bank of Canada will allocate CAD 10 million from 2026–27, plus recoup CAD 5 million annually via Retail Payment Activities Act license fees. Stablecoins now account for nearly 30% of global crypto transactions, with on-chain volumes exceeding USD 4 trillion—led by USDT and USDC. Canada’s framework mirrors the US GENIUS Act and EU MiCA, aligning with global digital asset policy. Industry leaders expect this stablecoin regulation to enhance financial stability, safeguard consumer funds and support private-sector innovation from projects like Shopify-backed Tetra Digital and Western Union’s Solana-based tokens. Experts warn that past events—such as the TerraUSD collapse, major DeFi exploits and USDe depegging—underscore collateralization and systemic risks. The stablecoin regulation is viewed as bullish for market confidence and broader adoption.
Bullish
The introduction of a clear, national fiat-backed stablecoin regulation in Canada is likely to boost market confidence and trading volumes. In the short term, the framework reduces issuer risk by enforcing full reserves and redemption rules, reassuring traders and liquidity providers. In the long term, alignment with global standards (US GENIUS Act, EU MiCA) and strong oversight by the Bank of Canada are expected to attract institutional capital, drive stablecoin adoption and foster innovation. Historical precedents—such as UST’s collapse and USDe depegging—highlight collateral risks; by addressing these through regulation, Canada sets a bullish tone for stablecoin markets and the broader crypto ecosystem.