In depth
Budget 2025 was released by Prime Minister Carney's government with the stated goal of, among other things, supporting innovation and global competitiveness. As part of an effort to support innovation in the financial sector specifically, the government indicated that it would implement new legislative frameworks to "allow responsible innovation to flourish".
One such legislative framework related to stablecoins. Generally speaking, a "stablecoin" refers to a crypto asset that is designed to maintain a stable value over time by referencing the value of a fiat currency or any other value or right, or combination thereof. A "fiat-backed stablecoin" is a type of stablecoin that seeks to replicate the value of a single fiat currency where the issuer sets aside a reserve of assets denominated in the given fiat currency. There are many other types of stablecoins that exist beyond fiat-backed stablecoins (e.g., those backed by gold, a basked of fiat currencies, or algorithmic stablecoins), however, the proposed legislation is limited to regulating fiat-backed stablecoins only.
As set out in Budget 2025, the forthcoming stablecoin legislation will include requirements for issuers of fiat-backed stablecoins to:
- Maintain and manage adequate asset reserves
- Establish clear redemption policies
- Implement robust risk management frameworks
- Protect sensitive and personal information of Canadians
In addition, to ensure the integrity of the system, Budget 2025 indicated that the legislation will incorporate national security safeguards, with the aim of making stablecoins safe and secure for consumers and businesses to use. The forthcoming legislation is also intended to be limited to regulating stablecoin issuances by "non-prudentially regulated issuers" in Canada only.
Regarding the administration of the proposed stablecoin regime, according to Budget 2025, the Bank of Canada will administer the framework, which is expected to include a mechanism for charging fees to regulated stablecoin issuers. The 2025 Budget also contemplates amendments being made to the Retail Payment Activities Act in order to enable the regulation of payment service providers that perform payment functions using prescribed stablecoins.
Going forward
The announcement of forthcoming stablecoin legislation is a welcomed development by many in the blockchain and crypto asset community. The 2025 Budget does not specify when the proposed legislation will be introduced in Parliament, leaving the timing uncertain. Canada's approach is expected to closely mirror developments in the United States, where the GENIUS Act, which was recently passed by Congress on 18 July 2025, established a regulatory framework for fiat-backed stablecoins and enabled corporations to issue US dollar-backed stablecoins. For more information see our GENIUS Act client alert here.
While the 2025 Budget creates a new regime to regulate stablecoins, it does not address a potential jurisdictional conflict with provincial/territorial securities laws. Generally, payment activities fall under federal oversight, while securities matters are regulated at the provincial/territorial level. To date, Canadian securities regulators have treated fiat-backed stablecoins as securities and/or derivatives (see CSA Staff Notice 21-332 and CSA Staff Notice 21-333) which will require coordination with the federal government's proposed legislative regime to eliminate unnecessary overlap and ensure jurisdictional alignment.
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Tiana Gleason, articling student, has contributed to this update.
