Why does Ottawa want to regulate Canadian stablecoins?

Adam Garetson, leader of Blockchain & Digital Assets Group at Gowling WLG, joins BNN Bloomberg to provide a lookahead to crypto in Canada heading into 2026.

Stablecoins have become increasingly popular over the years, drawing the attention of the federal government to regulate them in Canada.

Cryptocurrency groups called on the government to simplify the rules to make it easier to launch Canadian dollar-linked stablecoins in the New Year.

Proposed stablecoin rules, expected in the Spring 2026 session, will introduce asset management requirements intended to bolster domestic financial sovereignty and counter foreign digital currency influence.

What is a stablecoin?

Stablecoins are a type of cryptocurrency token built on a blockchain network, designed to maintain a steady value redeemable for a pegged flat currency, such as a Canadian or American dollar, on a 1:1 basis. The backing of a dollar ensures their stable value.

Ottawa said it aims to foster a domestic, Canadian dollar-backed stablecoin ecosystem to counter the import of foreign currencies.

“It really is designed to be the equivalent of holding cash at the end of the day, just digitally, on a blockchain, on the computer,” Adam Garetson, partner of blockchain and fintech at Gowling WLG told BNN Bloomberg.

Unlike volatile assets like Bitcoin, stablecoins are centralized, issued and managed by companies or issuers like Tether and Circle and designed for everyday transactions.

Why do stablecoins matter?

Stablecoins bridge the gap between traditional and digital finance. They act as primary on-ramps and off-ramps for the crypto ecosystem, according to a report from Mastercard.

International transfers can be settled within minutes at minimal costs, 24/7, offering an efficient alternative to slow, expensive traditional wire transfers, according to TD Economics.

• Latest updates on crypto news here

Mastercard said efficiency and accessibility promote financial inclusion for the world’s unbanked populations, requiring only an internet connection and a digital wallet to access global financial services.

Why is regulation being called for?

The Bank of Canada and cryptocurrency industry groups say the main concern for Ottawa is the potential impact on Canadian monetary sovereignty and financial stability, particularly as financial markets see an increase of U.S. backed digital currencies.

“Large firms like Shopify moved quickly to accept USDC,” Vass Bednar, managing director of the Canadian SHIELD Institute for Public Policy told BNN Bloomberg in an interview. “When our most valuable company is transacting through stablecoin, the policy environment here needs to recognize that innovation.”

The cryptocurrency groups warn if U.S. backed stablecoins become common in Canadian transactions, Canada could lose influence over it’s own currency and monetary policy.

A significant driver for the push of Canadian backed stablecoins is international development and corporate action, Bednar said. The U.S. introduced the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, a law designed to enforce the use and support of the U.S. dollar as a stablecoin.

“I think the biggest prompt to our expedited policy response was the general threat to monetary sovereignty through the GENIUS Act,” said Bednar.

Proposed rules for stablecoins issuers

Budget 2025 will bring legislation to establish rules for stablecoin issuers with Bill C-15. The rules will require genuine support of the digital assets and deal with issues of risk management, information privacy and national security.

“The Stablecoin Act governs issuers,” said Gareston. “It governs the issuance, creation and redemption of stable coins. So effectively an investor could go to an issuer, an actual creator of the stablecoin, and give them cash for stable coins.”

An investor could then use the currency on digital financial markets such as Kraken or Coinbase and trade on the market. Issuers of the coin, however, cannot generate interest on supported dollars.

Garetson helps public and private businesses navigate a complex legal and commercial environment around finance and tech sectors. He does not have a timeline for when the act will be enforced but advises businesses to begin preparing now by aligning with governance, compliance and operational systems.

Bednar meanwhile expects it will pass early next year as opposing parties back it.

“It is anticipated that the Conservative party is supportive of this legislation, meaning it could be passed in the Spring 2026 session,” said Bednar.

The draft law includes a strict ban on issuers paying interest or yield on stablecoins. Further, federal, provincial securities laws still apply.

“Canadians expect regulatory environments to reflect and anticipate the realities of today, and not be in constant catch-up mode,” said Bednar. “Trump’s GENIUS Act was the kick in the pants we needed.”

The Act mandates stablecoin issuers use qualified custodians to hold reserves, ensuring assets are backed, separate from the issuer’s own funds, and protected from bankruptcy. Custodians are typically regulated financial institutions that safeguard reserve assets reporting to the central bank or regulator. Bednar wonders who can qualify as a custodian.

“Legislation is silent about who can act as a qualified custodian, and where, geographically, reserve assets must be held,” said Bednar.