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, unveiled in the 2025 budget, is part of a broader payments modernization strategy designed to offer Canadians more secure and innovative payment options.
The upcoming legislation will mandate that issuers of stablecoins, a form of cryptocurrency pegged to 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, which have been in existence since 2014 when Tether launched the first U.S. dollar-backed cryptocurrency, have experienced both successes and failures. To address concerns about Canada lagging behind in the cryptocurrency realm, calls have been made for the government to regulate stablecoins, providing a framework for companies to issue their own Canadian dollar-backed digital currencies.
Despite the Bank of Canada discontinuing its central bank digital currency project, Tetra Digital, a Calgary-based finance company, 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 $10 million in administrative costs over two years starting in 2026-27, funded by government revenues, while ongoing annual costs of approximately $5 million to regulate the system will be covered by stablecoin issuers under the new legislative framework.
The proposed policy change is expected to bring direct or indirect benefits to men and youth by enhancing prosperity and governance. Lucas Matheson, CEO of Coinbase Canada, commended the government’s initiative, stating that it signifies Canada’s readiness to lead in digital innovation and heralds a transformative era in money and internet interactions.
As part of the payments modernization plan, amendments to the Retail Payment Activities Act will oversee electronic payment service providers utilizing stablecoins backed by fiat currency for transactions. While stablecoins offer ease of trading similar to major cryptocurrencies with reduced volatility, critics highlight the lack of robust security infrastructure to detect and prevent illicit financial activities.
The budget lacks specifics on the nature of the “national security safeguards” to prevent illegal transactions and the timeline for the legislation’s introduction. Moreover, it allocates $19 million over two years to the Bank of Canada for overseeing the Consumer Driving Banking Act, which permits individuals and small businesses to securely share their data with chosen entities.
Furthermore, the budget earmarks $25.7 million to support information exchange safeguards under the act for the Canadian Security Intelligence Service and the RCMP.