Canada is accelerating efforts to establish a comprehensive stablecoin regulatory framework, aiming to safeguard its financial sovereignty and compete with rapidly advancing international markets.
Details of the planned regulations could be announced in the federal budget on November 4, according to sources familiar with the process who spoke to Bloomberg. This move follows an intensive period of consultations led by the Department of Finance and other agencies with industry participants and regulators.
The urgency stems from a global race to define rules for digital currencies, particularly after the United States recently enacted its first stablecoin legislation. The U.S. GENIUS Act, signed earlier this year, classifies stablecoins as payment instruments, rather than securities or derivatives.
Despite its “light-touch” approach, the U.S. law has drawn criticism. Senator Elizabeth Warren labeled it a “lax regulatory framework for crypto banks,” while Federal Reserve Governor Michael Barr warned of “significant loopholes.”
Canadian officials are keen to resolve current ambiguities, where stablecoins have been inconsistently treated as either securities or derivatives. A clear framework would prevent capital flight to dominant USD-backed stablecoins, such as Tether’s USDT and Circle’s USDC, which collectively account for the majority of a global market exceeding $300 billion in circulating supply.
John Ruffolo, Co-Chair of the Council of Canadian Innovators, highlighted the risks of inaction. He warned that delays could “erode demand for Canadian bonds, raise interest rates, and weaken the Bank of Canada’s control over money supply dynamics.”
Ruffolo added that without domestic options and regulatory clarity, “Canadian capital could flow south of the border.” This underscores Canada’s broader goal to balance financial innovation with monetary stability.
The push aligns Canada with other major economies. Europe’s Markets in Crypto-Assets (MiCA) regulation already includes specific rules for stablecoin issuers. In Asia, Japan and Hong Kong are also advancing their policies, with Japan recently launching JPYC, its first yen-pegged stablecoin.
Analysts at Standard Chartered project that up to $1 trillion could shift from traditional bank deposits to U.S. stablecoin markets by 2028, intensifying pressure on nations like Canada to act swiftly. A robust Canadian framework could position the country as an attractive hub for local stablecoin issuers, enhancing digital sovereignty in an ecosystem largely dominated by the U.S. dollar.