Canada Greenlights Budget to Promote Stablecoin Policies

Canada’s government has successfully passed its federal budget in parliament, which, among other initiatives, will establish a stablecoin policy.

Parliament narrowly approved Prime Minister Mark Carney’s first budget on Monday evening. Within the comprehensive document lies a section outlining the issuance of stablecoins, to be regulated by the Bank of Canada. While there are further procedural steps needed for the budget’s specifics, this victory represents a significant achievement for the new administration. Reflecting various aspects of recent U.S. legislation regulating U.S. dollar-backed stablecoins, Canadian issuers will be required to maintain one-to-one reserves composed solely of the reference currency or other high-quality liquid assets, permit immediate redemptions, and adhere to numerous regulations regarding risk management, cybersecurity, disclosures, and management during failures. The Bank of Canada will oversee and maintain the registry of approved applicants.

Under this policy, non-bank stablecoin issuers will not be permitted to provide any form of interest or yield related to the stablecoin, whether in cash, digital assets, or other compensations, to their customers.

Prime Minister Carney recently appeared alongside the CEO of Coinbase Canada, Lucas Matheson, at a Canadian Football League championship game, although Matheson has suggested that the Canadian stablecoin approach could benefit from adjustments.

He described it as a “step in the right direction” in a statement on Tuesday, while advocating for an “interim path for CAD-denominated stablecoins to enter the market as soon as possible,” including the ability for issuers to share yield on stablecoin deposits.

“These measures would position Canada competitively on the global stage and help sustain the Canadian dollar’s significant influence worldwide,” Matheson stated.

The global stablecoin market is primarily dominated by tokens linked to the U.S. dollar, though various countries and the European Union are striving to increase the representation of their own currencies.