Key Takeaways:
- Canada’s upcoming federal budget includes provisions for regulating CAD-denominated stablecoins, following in the footsteps of the United States, which passed the GENIUS Stablecoin Act in July 2025.
- Under the legislation, stablecoin issuers will be required to hold and manage sufficient reserves backing their tokens, establish redemption policies, and implement safeguards to protect users’ personal and financial information.
- The Bank of Canada will allocate $10 million over the next two years to administer the legislation, with another $5 million offset as annual administrative costs from issuers. The goal is to modernize domestic payment systems and stop capital flight to USD-pegged tokens.
- The global stablecoin market cap currently stands at approximately $291 billion, with USD-backed assets dominating the space. The U.S. Treasury Department estimates the sector’s valuation to reach $2 trillion by 2028.
The Canadian government is set to unveil new legislation to regulate stablecoins in its 2025 federal budget. The development comes after the United States passed its landmark GENIUS Act to oversee the fiat-backed cryptocurrencies in July 2025.
Last week, Bloomberg reported that officials from the Department of Finance Canada and other federal agencies held constructive talks with industry stakeholders and regulators on regulating stablecoins.
Canada Unveils Stablecoin Regulation in 2025 Federal Budget
According to the budget document released on Tuesday, the upcoming legislation will require stablecoin issuers to hold and manage sufficient reserves, establish in-kind redemption policies, and implement various risk management frameworks, such as safeguards to protect users’ personal and financial data.
The Bank of Canada is set to allocate $10 million from its Consolidated Revenue Fund remittances over the next two years, starting in the 2026-2027 fiscal year, to administer the legislation. Another $5 million will be offset from issuers regulated under the country’s Retail Payment Activities Act, to cover the annual administrative costs.
While the document did not specify the timeline of when the legislation will come into effect, it is part of a broader plan by the government to modernize payment systems and make digital transactions faster, cheaper, and more secure for the country’s population.
Canada is also working on amending the Retail Payment Activities Act to impose regulation over payment service providers that utilize stablecoins. Moreover, the legislation aims to promote safe innovation of digital assets, and is expected to be beneficial for Canadians by ensuring appropriate policies for stablecoin management, the budget document noted.
Canada Vows to Stop Capital Flight into USD Stablecoins by Supporting the Development of CAD-Pegged Tokens
During discussions held between the Department of Finance Canada and industry stakeholders, officials reportedly focused on stablecoin classification and avoiding capital flight to U.S. dollar-backed tokens, which are the market leaders.
This announcement comes just months after the U.S. passed its GENIUS Act to regulate stablecoins, which established a clear set of rules for dollar-pegged cryptocurrencies, aligning with the Trump administration’s pro-crypto policy direction.
The US government policy has set a precedent for a global trend of establishing stablecoin regulations, ranging from the Market in Crypto Assets Regulation (MiCA) across the European Union to ongoing efforts in Japan, South Korea, and now Canada.
In Canada, payments platform Tetra Digital is one of the major stablecoin players. The company has raised $10 million to create a digital version of the Canadian dollar, following a strategic investment from the National Bank of Canada.
The stablecoin regulation also comes as the country dropped its plans to issue a central bank-issued digital currency (CDBC), with Bank of Canada Governor Tiff Macklem stating there wasn’t a compelling case to move forward with the digital CAD at this time.
Standard Chartered Predicts Stablecoins to Attract $1 Trillion in Bank Deposits from Emerging Markets by 2028
Meanwhile, institutional stablecoin adoption is on the rise, with major players like Visa, MasterCard, Western Union, MoneyGram, and Zelle either integrating or announcing plans to integrate stablecoin solutions into their operations in recent months. Leading European and American banks have also gotten on the train to support stablecoin payments or launch their own fiat-backed digital tokens to transform global remittances and cross-border settlements.
The total market cap of stablecoins currently stands at $291 billion, with USD-denominated tokens dominating the sector. Tether’s USDt leads the chart, accounting for $183 billion of that total, followed by Circle’s USDC at $74.66 billion, and Ethena’s USDe with $9.07 billion.
Standard Chartered analysts estimate that as much as $1 trillion in bank deposits from emerging markets could move into U.S. stablecoins by 2028. Meanwhile, the U.S. Department of the Treasury estimated in April that the stablecoin market cap would hit $2 trillion by the end of President Donald Trump’s term.
Also Read: Why is Crypto Falling Now?