On November 4, 2025, the Canadian federal government released Budget 2025.1 This budget introduces significant structural shifts, including $141 billion in new spending on housing, infrastructure, defense, and productivity, alongside $60 billion in savings from public service cuts, and introducing immediate expensing for clean energy and manufacturing investments.
Among these initiatives, Budget 2025 marks a step forward in the regulation of stablecoins,2 signaling the Canadian government’s commitment to modernizing Canada’s payments ecosystem. This client alert examines the proposed framework, its implications for businesses, and how Canada’s current regulatory landscape compares to global trends.
Stablecoins in the Spotlight
Stablecoins are digital assets designed to maintain a stable value, typically pegged 1:1 to a reference asset such as fiat currency or commodities like gold.3 Unlike cryptocurrencies, which may be volatile, they aim to provide price stability, making them attractive for payments, remittances, and liquidity management.
Adoption of stablecoins in Canada is accelerating. Tetra Digital Group plans to launch fiat-backed stablecoins in 2026, which would mark the first time a regulated financial institution will issue stablecoins in Canada.4 Meanwhile, global players such as Shopify, Visa, and PayPal have begun integrating stablecoins into their payment systems.5
Canada to Launch Stablecoin Framework
Budget 2025 confirms the federal government’s intention to introduce legislation regulating fiat-backed stablecoins. The proposed framework will require issuers to maintain adequate reserves, redemption policies, risk management protocols, privacy protections, along with national security safeguards. The Bank of Canada (Bank) will administer the regime, funded by $10 million over two years starting 2026, with ongoing costs to be offset by regulated issuers. Amendments to the Retail Payment Activities Act (RPAA) are also expected to enable oversight of payment service providers handling stablecoin transactions.6
While the implementation timeline is undisclosed, the government’s stated goal “to ensure Canada does not just withstand global shifts but prospers from them”7 underscores the initiative’s transformative potential.
Global Momentum Toward Stablecoin Regulation
Canada’s move comes amid a wave of global regulatory activity regarding stablecoins. In the United States, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, its first federal framework for payment stablecoins, was enacted earlier this year. The act classifies payment stablecoins as payment instruments rather than securities,8 and seeks to reduce regulatory uncertainty, protect consumers, and promote global interoperability.
Similarly, the European Union implemented the Markets in Crypto-Assets (MiCA) regulation, requiring stablecoin issuers to be licensed and maintain full 1:1 reserve backing.9 The United Kingdom is close behind, with the Financial Conduct Authority reviewing consultation responses on its proposed stablecoin framework regulating issuance and custody, with final rules expected in 2026.10
Cozen O’Connor’s previous client alert on the GENIUS Act and its core provisions can be found here.
Current Canadian Regulatory Landscape
Canada currently lacks a comprehensive framework for stablecoins, leaving issuers subject to a patchwork of regulatory requirements. Unlike the United States, where regulation is primarily federal, Canadian oversight is fragmented across multiple regimes.
Stablecoins have largely been treated as securities or derivatives in Canada, triggering provincial compliance obligations with local regulators.11 At the same time, they may fall under federal anti-money laundering and anti-terrorist-financing rules enforced by the Financial Transactions and Reports Analysis Centre of Canada, and could be captured under the RPAA if considered a form of payment instrument. With the forthcoming federal stablecoin legislation, issuers could soon face an additional layer of regulation without a harmonized approach.
This overlapping structure creates complexity for businesses operating in the space. A key challenge for policymakers will be reconciling jurisdictional boundaries between provincial securities regulators and federal oversight to provide clarity and reduce compliance burdens.
What’s Next for Businesses and Regulators
Canada’s fragmented approach contrasts with more prescriptive regimes abroad, raising potential cross-border compliance challenges. Ron Morrow, executive director of payments at the bank, stressed the urgency of a domestic stablecoin framework, noting that many jurisdictions already have, or soon will have, crypto asset regulations.12 This gap also presents an opportunity for Canadian policymakers to design guardrails that balance financial stability with innovation. Businesses should monitor developments closely, as Canada’s approach will influence adoption, investment, and interoperability in the digital economy.
Cozen O’Connor’s integrated team across Canada and the United States delivers practical, forward-looking guidance on digital asset regulation, including emerging developments around stablecoins. To learn how we can support your digital asset strategy, please contact a member of our Capital Markets & Securities team.