- The Bank of Canada will supervise the framework, initially allocating CA$10 million and CA$5 million per year thereafter.
- The Retail Payment Activities Act will be amended to include payment services related to stablecoins.
- Canada’s reforms align with similar regulatory frameworks in the United Kingdom, the European Union, and Australia.
The Government of Canada’s 2025 federal budget, released on November 4, centers fiat-backed stablecoins in its plan to modernize the national payments system.
This initiative signals a clear policy shift from exploring central bank digital currencies toward regulating private digital assets within Canada’s financial framework.
By establishing detailed rules around issuance, redemption, and supervision, the government aims to ensure stablecoins are secure, transparent, and suitable for everyday transactions while protecting financial stability.
The Bank of Canada will oversee the framework and incorporate stablecoin provisions into the Retail Payment Activities Act.
Regulated pathway for fiat-backed stablecoins
Under the new framework, issuers will be required to maintain adequate reserves, implement robust risk management systems, and comply with data protection standards.
The law will also include national security provisions to safeguard the integrity of the financial system and protect consumers.
The Bank of Canada will allocate CA$10 million over two years beginning in 2026 to manage the framework, with annual operating costs of CA$5 million to be recovered from regulated issuers.
Amendments to the Retail Payment Activities Act (RPAA) will bring payment service providers handling stablecoin transactions under formal regulatory oversight.
Introduced in 2021, the RPAA already governs domestic and foreign payment companies operating in Canada. Extending it to cover stablecoin activity reflects the government’s intent to fold digital currencies into the existing financial regulatory structure.
From central bank currency to private innovation
This move marks a turning point in Canada’s digital currency policy. In September 2024, the central bank decided not to launch a retail central bank digital currency and redirected its focus to analyzing global payment trends.
That decision left a gap now addressed by the new stablecoin legislation.
Officials have acknowledged that Canada’s reforms have lagged behind those of some major economies.
Ron Morrow, Director of Payments at the Bank of Canada, previously warned that Canada could fall behind the UK, Australia, and the EU, each of which has already established digital asset frameworks.
By choosing to regulate rather than issue a public digital currency, Canada adopts a hybrid model that enables private-sector innovation while preserving government oversight. The approach is intended to foster payment innovation without sacrificing regulatory control.
Building a modern, secure payments system
The stablecoin framework is part of a broader payments modernization agenda.
Alongside these rules, the government plans to advance consumer-focused banking, open data mobility, and a Real-Time Rail system expected to enable instant fund transfers by 2026.
For consumers, the reforms promise faster, more reliable transactions and potentially lower cross-border payment costs. For issuers and payment providers, the challenge will be meeting new compliance requirements while remaining competitive.
The legislation’s emphasis on privacy and national security also reflects the government’s objective to build public trust in digital finance as it becomes a mainstream component of the economy.
Toward a digitally integrated financial system
The new stablecoin rules complement Canada’s existing crypto regulations, which already impose strict compliance obligations on exchanges and trading platforms.
Several large international firms have withdrawn from the market in recent years, citing the complexity of regulatory demands.
In addition, the Crypto Asset Reporting Framework, effective in 2026, will require crypto service providers to report client and transaction data to tax authorities.
Taken together, these developments reflect a strategic shift in how Canada approaches digital finance. By moving from experimental central bank projects to clear regulation for private digital assets, the government is laying the groundwork for a secure and inclusive digital economy.