Canada Unveils Stablecoin Legislation Plans In 2025 Federal Budget
Canada’s 2025 federal budget has unveiled plans to establish new regulations for stablecoins pegged to fiat currencies.
With the new legislation, the government hopes to make stablecoins “safer for Canadians and businesses” as well as help them “build trust in digital payments,” it wrote in its budget document.
Stablecoin Issuers Will Be Required To Maintain “Adequate Reserves” And Mitigate Risk
The legislation will require stablecoin issuers to hold and manage adequate reserves. These firms will also have to establish redemption policies, implement risk management frameworks, and protect the personal information of users transacting with their tokens.
According to the legislation, the Bank of Canada will also set aside $10 million from its Consolidated Revenue Fund remittances over the two years starting from 2026-2027. These funds will then be used to administer the new legislation.
After the framework for stablecoins has been set up, the annual administrative costs to maintain the system are estimated at $5 million. However, this cost will be paid for from fees charged on the stablecoin issuers that are regulated under the framework.
Canadian Government Also Preparing Amendments For Retail Payment Activities Act
In addition to the stablecoin legislation, the Canadian government is also working on amendments for the Retail Payment Activities Act.
Those amendments, which aim to promote safe innovation of digital assets, will activate regulation over payment service providers that utilize stablecoins.
“These changes are intended to benefit all Canadians by protecting confidential information related to the supervision of payment service providers,” the government said in its budget document.
The amendments to the Retail Payment Activities Act are also the next step in the government’s payments modernization plan.
Canadian Agencies Have Held Extensive Talks Over Recent Weeks
The budget document and proposed stablecoin legislation comes after Bloomberg reported last week that officials at the Department of Finance Canada and other agencies held extensive talks over recent weeks with stakeholders in the industry and regulators.
The talks reportedly revolved around stablecoin regulation and the classification of stablecoins. They also focused on how to prevent capital flight risk to US dollar-backed tokens.
Global Stablecoin Race Kicks Off After GENIUS Act Signing
The move by Canada’s government is the latest in a global stablecoin race, which kicked off after US President Donald Trump signed the GENIUS Act into law. The act establishes the first framework on the federal level for stablecoin firms looking to issue their tokens in the US.
Since the GENIUS Act’s signing, the market cap for stablecoins has soared from around $253 billion to over $300 billion, according to data from DefiLlama.
Stablecoin market cap (Source: DefiLlama)
Tether’s USDT, which is a dollar-backed stablecoin, dominates the market with a 59.91% share of the sector and a capitalization of over $183.346 billion. The next-biggest stablecoin is Circle’s USD Coin (USDC) with its capitalization of more than $74.642 billion.
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