Canada has included stablecoin regulations as a key element of its 2025 federal budget to support innovation in digital finance.

According to the 2025 budget unveiled on Nov. 4, Canada will introduce a new legislative framework for fiat-backed stablecoins by establishing clear rules around issuance, redemption, and oversight.

While details regarding when the legislation will be tabled have not been disclosed, stablecoin issuers will have to maintain adequate asset reserves, implement risk management measures, and protect personal and financial data to ensure consumer safety and financial stability.

“The legislation will also include national security safeguards to support the integrity of the framework so that fiat-backed stablecoins are safe and secure for consumers and businesses to use,” an excerpt from the budget document said.

Further, the Bank of Canada is expected to allocate $10 million over two years starting in 2026 to administer the framework, along with an estimated $5 million in annual costs that will be recouped from regulated issuers.

Canada wants to modernize payments by integrating stablecoins into its financial system, especially as the United States advances with federal legislation like the GENIUS Act and jurisdictions across the globe roll out dedicated frameworks to regulate digital assets. 

To ensure stablecoins can be used safely for everyday payments, Canada will amend its Retail Payment Activities Act to “enable the regulation of payment service providers” that carry out payment functions using prescribed stablecoins, the budget document noted.

The RPAA is a supervisory framework governed by the Bank of Canada for both domestic and foreign payment service providers operating in the country. It was introduced in 2021 to ensure secure, reliable, and competitive retail payment services while protecting end users and addressing potential national security concerns.

Canada ditches central bank digital currency for stablecoins

Regulators in Canada were initially interested in launching a CBDC to future-proof the financial system and offer a public alternative to private digital currencies, but those plans were dropped in September 2024 without any formal timeline to revisit the project. At the time, the central bank said it had decided to shift its focus toward studying broader payment trends both in Canada and around the world.

Over the past year, industry participants have been calling on the government to provide clarity on digital asset regulation and keep pace with global developments. Last month, Bank of Canada’s Executive Director of Payments, Ron Morrow, warned that the country risks falling behind in regulating stablecoins and broader payment innovation.

“The pace of change here in Canada has been – to use a kind word – gradual. Other major jurisdictions like the United Kingdom, Australia and the European Union have already embraced changes in many areas,” Mr. Morrow told the media. 

Canada should “weigh the merits of federal stablecoin regulation, similar to what other countries have done,” he added.

Crypto regulations in Canada

Canada currently has a strict regulatory framework in place to oversee crypto exchanges and trading platforms, but over the past few years, many major international firms have exited the market, citing compliance burdens and lack of clarity.

Last year, it introduced the Crypto-Asset Reporting Framework, which will come into force in 2026 and require crypto service providers to report detailed transaction and client data to tax authorities.