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Canada Moves Towards First Federal Framework For Stablecoins
Forthcoming legislation is expected to replicate models adopted in comparable jurisdictions by providing clear regulation of stablecoins and clarifying the boundary between payment stablecoins and securities.
Canada’s Department of Finance has signalled that the government intends to introduce new legislation to regulate the issuance of fiat-backed stablecoins.
In its Budget 2025 announcement in early November 2025, the Department included a preview of the legislation, which would be the first of its kind in Canada.
“This legislation will require issuers to maintain and manage adequate asset reserves, establish redemption policies, implement risk management frameworks, and protect the sensitive and personal information of Canadians,” the document notes.
“The legislation will also include national security safeguards to support the integrity of the framework, ensuring that fiat-backed stablecoins are safe and secure for consumers and businesses to use.”
The framework will extend to “non-prudential” issuers of fiat-backed stablecoins, including payment service providers (PSPs) and excluding banks, insurers and deposit-taking institutions.
In addition, amendments will be made to the Retail Payment Activities Act (RPAA) to enable the regulation of non-issuer PSPs (PSPs that facilitate payments without issuing stablecoins themselves) that carry out “payment functions” using “prescribed” stablecoins.
The legislation will be administered and enforced by the Bank of Canada, which will receive CAD10m ($7m) over two years to cover the initial administration costs. Administrative costs in subsequent years are projected to be CAD5m ($3.6m) per year, and will be recouped through fees charged to regulated issuers.
Regulatory clarity for fiat-backed stablecoin issuers
Though light on details, the legislation described in Budget 2025 points to a significant shift in the regulatory landscape for stablecoins in Canada.
To date, where specific stablecoin regulation exists, it has been developed by the Canadian Securities Administrators (CSA) and implemented through Staff Notices, a form of non-binding interpretive guidance.
At the end of 2024, as covered by Vixio, the CSA introduced a Staff Notice designed to ensure that crypto trading platforms do not offer high-risk stablecoins to their users.
The Staff Notice focused on ensuring that fiat-backed stablecoin issuers meet a minimum standard of financial health, stability and transparency in order to be listed by regulated trading platforms.
For example, such stablecoins must reference the Canadian or US dollar, and must be fully backed by reserve assets that are denominated in that same currency.
Permissible reserves include cash, Canadian or US short-term government bonds, and money market funds that are authorised and regulated in Canada or the US.
It is likely that the new federal legislation will include these same provisions, albeit with a focus on protecting consumers, businesses and the payment system, rather than crypto investors.
An end to the securities debate?
The 2024 Staff Notice was also notable for the fact that it did not entirely settle the question of whether fiat-backed stablecoins constitute securities.
It clarified, on an interim basis, that trading platforms that list such stablecoins would not fall foul of securities laws, but it warned that issuers may violate securities laws in other ways, depending on how they offer and distribute their stablecoins.
Though not stated explicitly in Budget 2025, it is likely that the legislation envisioned by the Department of Finance will settle the securities question once and for all.
The US GENIUS Act, enacted by Congress in July 2025, offers an example of how this could look. It makes clear that a payment stablecoin cannot also be a national currency or a security issued by an investment company.
In June 2025, Coinbase Canada CEO Lucas Matheson called on Canada’s federal government to introduce stablecoin legislation along the lines of the GENIUS Act. He said the rules should ensure that stablecoins can “flow freely” between banks and digital wallets, as well as resolve the securities question.
“The federal government must define stablecoins as money, not securities,” he said. “They should be regulated like payment instruments, not like speculative assets.”
Examples from other jurisdictions
Other jurisdictions have generally followed the GENIUS Act’s approach to distinguishing payment stablecoins from securities.
Hong Kong’s Stablecoins Ordinance establishes that a stablecoin cannot also be regulated under the territory’s Securities and Futures Ordinance, meaning a security as recognised by law cannot be a payment stablecoin, and a payment stablecoin cannot be a security.
Similarly, under the EU’s Markets in Crypto-Assets (MiCA) Regulation, fiat-backed stablecoins that reference a single currency are defined as e-money tokens (EMTs), and must be issued by either credit institutions or holders of an electronic money licence.
Moreover, MiCA specifically excludes asset-referenced tokens (ARTs) from this classification. This ensures that assets that purport to hold a stable value but do not function like money, such as gold-backed tokens, face a higher regulatory burden.
Finally, both Singapore’s and Japan’s new stablecoin legislation close the securities debate by adding qualifying fiat-backed stablecoins to existing payments instruments regulation.
In 2022, Japan amended its Payment Services Act (PSA) so that stablecoins are treated as “electronic payment instruments” (EPIs) when they meet certain criteria (such as being fully backed, redeemable and pegged to legal tender).
In 2023, Singapore introduced a regulatory framework for single-currency stablecoins under the Payment Services (Amendment) Act 2021. The framework sets out criteria that issuers of Singapore dollar or G10 currency stablecoins must meet in order to obtain a license as an issuer of a “digital payment token” (DPT).
Should Canada follow the lead of these other jurisdictions, the effect of its forthcoming legislation would be to create a clear division between payment stablecoin and securities regulation.
This would ensure regulatory clarity for firms that are seeking to issue or handle payment stablecoins in Canada, and permit Canadian firms to transact easily with counterparties in jurisdictions with similar regulations.
