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As anticipated, the federal government has announced in Budget 2025 its intention to regulate the issuance of fiat-backed stablecoins in Canada. The proposed legislation will require issuers to maintain and manage adequate asset reserves, establish redemption policies, implement risk management frameworks, and protect the sensitive and personal information of Canadians. The legislation will also include national security safeguards to support the integrity of the framework so that fiat-backed stablecoins are safe and secure for consumers and businesses to use.
The Bank of Canada will administer the new regime for non-prudentially regulated issuers in Canada. Related amendments to the Retail Payment Activities Act (RPAA) will also be made to enable the regulation of payment service providers that carry out payment functions using prescribed stablecoins. To date, the RPAA has expressly excluded digital assets from the scope of payment activities that must be conducted by registered payment service providers.
This is a landmark event for Canada's crypto asset industry, which has been lobbying the federal government for years to bring Canada into step with other jurisdictions that are regulating stablecoins as electronic money or payment instruments. Canada has been the only major economy attempting to regulate stablecoins as securities, using a disclosure-based framework ill-suited to addressing the safeguarding and liquidity risks associated with stablecoins. While the new legislation will not eliminate the potential characterization of stablecoins as securities, it should provide a path to licensure for issuers under a clear, prudentially-oriented regime.
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