Canada is taking a major step toward regulating digital finance by including stablecoin legislation as a central part of its 2025 federal budget. The government plans to introduce a new legal framework for fiat-backed stablecoins, aimed at promoting innovation while ensuring financial stability and consumer protection.
According to the federal budget released on November 4, the legislation will establish clear rules around issuance, redemption, and oversight of stablecoins. Although the timeline for introducing the bill has not been disclosed, the framework will require issuers to maintain sufficient asset reserves, enforce risk management practices, and safeguard personal and financial data.
“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,” the budget document stated.
Bank of Canada to Oversee Implementation
To ensure proper administration of the new system, the Bank of Canada will allocate $10 million over two years starting in 2026, with an additional $5 million in annual costs to be recovered from regulated issuers.
This funding will support the creation of a stablecoin oversight division within the central bank part of a broader effort to integrate digital assets into Canada’s financial infrastructure.
Stablecoins Over CBDCs: A Strategic Shift
The move marks a significant policy shift for Canada, which last year abandoned plans to develop a central bank digital currency (CBDC). In September 2024, the Bank of Canada confirmed that it had no immediate timeline to revisit a digital dollar, opting instead to study global payment innovations and private-sector solutions like stablecoins.
By focusing on stablecoin regulation rather than a CBDC, Canada aims to modernize its payment system and keep pace with international peers such as the U.S., U.K., and the European Union, all of which have introduced or proposed digital asset frameworks.
Amendments to Retail Payment Activities Act (RPAA)
As part of this initiative, the government plans to amend the Retail Payment Activities Act (RPAA) to include stablecoin-related payment functions. This will allow the Bank of Canada to supervise payment service providers (PSPs) that handle stablecoin transactions both domestic and foreign.
The RPAA, first introduced in 2021, ensures that retail payment services are safe, reliable, and competitive, while addressing national security concerns and protecting consumers.
Canada Responds to Calls for Regulatory Clarity
Industry leaders have long urged Canadian authorities to provide clearer guidelines for digital assets to prevent the country from falling behind in innovation.
In October, Ron Morrow, the Bank of Canada’s Executive Director of Payments, cautioned that “the pace of change here in Canada has been – to use a kind word – gradual.” He emphasized the need to align with global standards and explore federal stablecoin regulation, similar to approaches taken in the U.K., Australia, and the EU.
Existing Crypto Oversight and Future Outlook
Canada already enforces one of the strictest crypto regulatory regimes in the world. All exchanges and trading platforms must register with provincial securities regulators. However, the heavy compliance burden has pushed many major international firms to exit the market.
Additionally, the Crypto-Asset Reporting Framework (CARF) set to take effect in 2026 will require digital asset service providers to report detailed transaction and client data to tax authorities, bringing more transparency to the sector.
By introducing stablecoin-specific rules, Canada is signaling a new era of balanced regulation one that fosters innovation while protecting consumers and maintaining national financial integrity.
Canada’s decision to regulate stablecoins instead of launching a CBDC marks a strategic shift toward embracing private-sector digital innovation. With the Bank of Canada taking the lead, the country aims to build a secure, transparent, and future-ready digital payments ecosystem positioning itself as a leader in the next phase of financial modernization.
