Canadian Stablecoins Advance as Regulators Step Up Pressure

Anticipation is growing over what the federal budget could reveal about stablecoins, one of the most talked-about parts of the crypto landscape. Stablecoins are digital tokens designed to track the value of conventional currencies rather than replace them, and their rapid growth has sparked concern that, without a clearer policy, they could pose risks to Canada’s financial stability.

Industry leaders and regulators have pushed to simplify rules for issuing Canadian-dollar stablecoins to prevent capital flowing offshore. “At a minimum, from a sovereignty perspective, Canadians should want a Canadian stablecoin,” said Didier Lavallée, chief executive of digital-asset firm Tetra Digital Group, underscoring worries that absent domestic options, funds could migrate into U.S.-dollar–linked tokens and foreign assets.

U.S. stablecoin dominance puts pressure on Canada

Last summer’s U.S. legislation created a clearer regulatory framework and reinforced the U.S. dollar’s position in the stablecoin market, raising the profile of faster, lower-cost money transfers. Because stablecoins are meant to be backed by conventional assets, issuers must hold reserves such as U.S. dollars and government bonds. The lack of Canadian-dollar stablecoins therefore risks pushing liquidity out of Canadian currency and into U.S. dollar holdings.

Bank of Canada officials and former senior central bankers have urged Ottawa to weigh federal regulation. “Canada should also weigh the merits of federal stablecoin regulation,” said Ron Morrow, executive director of payments at the Bank of Canada, in a September speech. Timothy Lane, who stepped down as deputy governor in 2022, warned in an October report that “stablecoins are becoming too important to be ignored” and called for a coherent Canadian framework.

Regulators and industry figures are watching closely. Peter Routledge, head of Canada’s banking regulator, has flagged the sector’s rapid evolution and said he will pay attention to any budget measures, while investor John Ruffolo has highlighted the potential consequences if deposits shift into stablecoins. Ruffolo estimates that if as little as 5% of Canadian bank deposits—roughly $135 billion—moved into U.S.-based stablecoins, it could reduce domestic lending capacity by as much as $675 billion.

Private sector leads Canada’s stablecoin push

Given the urgency, private companies are already advancing their own Canadian-dollar stablecoins rather than waiting for policy changes. Lavallée notes that financial innovation in Canada often progresses slowly, so firms are mapping out regulatory paths themselves. Tetra, for example, is registered as a Canadian trust company and has attracted backing from institutions such as Wealthsimple, National Bank, ATB Financial and Shopify to prepare a stablecoin targeted for release early next year.

Other firms are moving forward as well: Transactix Financial Inc. announced plans to develop a token, and Loon Technology Inc. recently raised $3 million to pursue a Canadian-dollar stablecoin. The Ontario Securities Commission, which has taken a leading role in oversight, believes the current engagement-based approach is working. “I think it’s working well,” said Grant Vingoe, head of the OSC.

Uptake and impact of stablecoins still unclear

Regulators remain divided on how widely stablecoins will be used for everyday payments. Vingoe warned it is still an open question whether stablecoins will become a mainstream payment method, noting that improvements to existing payment systems could prove equally or more effective. So far, the regulatory process has produced one approved U.S.-dollar stablecoin issuer—Circle—while Canadian engagement with issuers remains more tailored and case-by-case than the U.S. legislative route.

That adaptive approach aims to address risks without locking in rules that could quickly become outdated in a fast-moving market. At the same time, regulators are alert to potential misuse of stablecoins for illicit activity and emphasize the need for robust controls. Central bank digital currencies have been discussed as an alternative, but the Bank of Canada has paused work on a retail CBDC for now.

Financial institutions balance innovation with risk concerns

Banks and payment networks are also adapting. Swift, which underpins international banking flows, announced plans to integrate a blockchain-based ledger to enable real-time, around-the-clock cross-border payments, with more than 30 banks including RBC and TD Bank Group participating.

While innovation advances, policymakers stress the importance of finding a Canadian path that balances opportunity and risk. Officials caution against rushing and simply following other jurisdictions without tailoring rules to Canada’s financial system and priorities.

Stablecoins set for massive global expansion

The global market for stablecoins is expected to grow substantially. Citigroup projected in September that the total stablecoin pool could expand from roughly US$200 billion at the start of 2025 to US$1.9 trillion by 2030 in its base case, and as much as US$4 trillion in a bull case—figures that highlight why policymakers are paying close attention.

On the domestic front, the Finance Department says it is actively assessing risks and options. “The government continues to work closely with federal and provincial regulators to assess these risks and evaluate measures that could be considered to mitigate them, while ensuring that opportunities are not missed,” Finance Department spokesman Benoit Sabourin said in a statement.

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