Canada Stablecoin Regulation Legislation in 2026, Allocating 10 Million CAD to Launch

Canada plans to introduce legislation supporting stablecoins backed by fiat currency in the 2025 federal budget. According to the government’s announced 2025 budget on Tuesday, Canadian stablecoin issuers will be required to hold sufficient reserves, establish redemption policies, and implement various risk management frameworks, including measures to protect personal and financial data. The Bank of Canada will allocate $10 million over two years starting from the 2026-2027 fiscal year to ensure smooth operations.

Detailed Overview of Canada’s 2026 Stablecoin Regulatory Framework

The Canadian government announced a plan to regulate stablecoins, requiring fiat-backed issuers to maintain adequate reserves and adopt strong risk management measures. According to the government’s November 4, 2024, announcement of the 2025 budget, stablecoin issuers will be mandated to hold sufficient reserves, develop redemption policies, and implement various risk management frameworks, including measures to protect personal and financial data.

These requirements are highly aligned with the US GENIUS Act and the European Union’s MiCA regulatory framework, indicating that global stablecoin regulation is converging. The reserve requirement means issuers must hold an equivalent amount of fiat or highly liquid assets for each stablecoin issued, ensuring users can redeem 1:1 at any time. Redemption policies must clearly specify the process, timing, and fees, safeguarding user interests. The risk management framework covers market risk, credit risk, operational risk, and cybersecurity risk, ensuring the robust operation of the stablecoin system.

The Bank of Canada will allocate $10 million over two years starting from the 2026-2027 fiscal year to ensure smooth operations; subsequent annual costs are projected at $5 million, which will be offset by stablecoin issuers regulated under the Retail Payment Activities Act. This “regulator self-funding” model ensures that regulatory costs are borne by the industry rather than taxpayers. The initial $10 million will be used to establish regulatory infrastructure, train regulators, develop monitoring systems, and more. The ongoing annual cost of $5 million will support daily regulatory operations.

Nearly four months have passed since the US passed the stablecoin regulation bill, the GENIUS Act, which has put pressure on Canada to establish its own token regulation rules. The passage of the US GENIUS Act creates a “regulatory arbitrage” risk: if Canada does not follow suit, unregulated stablecoin issuers could operate within Canada and serve US users, bypassing US regulation. Conversely, if US stablecoins gain clear regulatory support while Canada remains in a gray area, Canadian stablecoin businesses may lose competitiveness or be forced to relocate to the US.

Although the document does not specify when the legislation will be submitted, it is part of a broader plan to modernize payments, enabling Canada’s 41.7 million population to conduct digital transactions more quickly, cheaply, and securely. Placing stablecoin regulation within this broader payment modernization strategy shows that the Canadian government views stablecoins as an essential component of future payment systems rather than a risk to be suppressed.

Tetra Digital Raises $10 Million to Develop Canadian Dollar Stablecoin

Payment platform Tetra Digital is one of Canada’s leading stablecoin companies. After securing investments from Shopify, Wealthsimple, and the Bank of Canada, it has raised $10 million to create a digital version of the Canadian dollar. The investors’ lineup is highly symbolic: Shopify, one of Canada’s most successful tech companies, indicates that e-commerce giants see the potential of stablecoins in online payments. Wealthsimple, a leading Canadian fintech, shows emerging financial institutions’ interest in stablecoins. The Bank of Canada’s participation signals mainstream financial recognition of stablecoins.

The launch of a CAD-backed stablecoin will fill an important gap in the market. Currently, the stablecoin market is dominated by US dollar stablecoins (USDT, USDC, BUSD, etc.), which account for over 95% of the market share. Stablecoins in other fiat currencies are rare; euro stablecoins (EUROC, EURC) are just beginning, and stablecoins in British pounds, Japanese yen, and Chinese yuan are nearly nonexistent. As G7 currencies and the sixth-largest reserve currency globally, the introduction of a Canadian dollar stablecoin will provide Canadian businesses and individuals with a digital payment tool denominated in their local currency.

Use cases for the CAD stablecoin include: cross-border payments for Canadian businesses (avoiding currency conversion costs), domestic digital payments by Canadians, remittances from expatriates, and CAD-denominated transactions in DeFi protocols. If Tetra Digital successfully launches and gains regulatory approval, it could become the most significant stablecoin project in North America outside of the US.

Strategic Shift from CBDC to Stablecoins

Canada previously abandoned plans to issue a central bank digital currency (CBDC) in September 2024. Bank of Canada Governor Tiff Macklem stated that there was no compelling reason to advance the project at that time. This decision marks a major shift in Canada’s digital currency strategy: from a government-led CBDC to a market-led stablecoin approach.

While both CBDC and stablecoins are digital forms of fiat currency, their operational logic is entirely different. CBDC is a digital currency issued and managed directly by the central bank, with users accessing accounts directly at the central bank or indirectly through commercial banks. Stablecoins, on the other hand, are digital tokens issued by private companies, backed by fiat reserves, and operate on blockchain networks. CBDC provides the central bank with direct control over the payment system but requires substantial technological investment and restructuring of the existing banking system. Stablecoins leverage existing blockchain infrastructure and market innovation, with the government providing only regulatory oversight.

Canada’s decision to shift from CBDC to stablecoins may be based on several considerations. First, cost-effectiveness: CBDC requires hundreds of millions or billions of dollars in infrastructure investment, whereas stablecoins are funded by private enterprises. Second, technological risks: CBDC systems, if malfunctioning, could impact the entire payment network; failures of stablecoins would primarily affect individual issuers. Third, market innovation: the stablecoin space is rapidly evolving with new use cases and business models, and a government-led CBDC might stifle this innovation.

This strategic shift also reflects global trends. Besides China and the Bahamas, most developed countries are observing or slowing down CBDC development, focusing instead on regulating private stablecoins. The US, EU, UK, and Singapore have all chosen this path, aligning with Canada’s decision.

Stablecoin Market Explodes to $309 Billion, Approaching $2 Trillion

The current stablecoin market size is $309.1 billion, with the US Department of the Treasury estimating it will reach $2 trillion by 2028. This implies a nearly 6.5-fold growth over three years, with an annual growth rate exceeding 80%. Several factors drive this explosive growth.

Institutional adoption is increasing. Over recent months, companies like Western Union, SWIFT, MoneyGram, and Zelle have integrated or announced plans to integrate stablecoin solutions. Western Union, as the world’s largest remittance company, integrating stablecoins signals recognition from traditional remittance industries. SWIFT, as the dominant global interbank messaging network, exploring stablecoins is strategically significant, indicating even the most conservative financial infrastructure is considering blockchain upgrades. MoneyGram and Zelle’s involvement reflects competitive pressures in the payments industry. As stablecoins offer faster, cheaper cross-border transfers, traditional remittance providers risk losing market share if they do not adapt. This competitive dynamic is pushing the entire payments industry toward stablecoins. Clarified regulatory frameworks will accelerate this process, as companies are more willing to invest and innovate under clear rules.

Key Data and Forecasts for the Stablecoin Market

Current Market Size: $309 billion

2028 Forecast: $2 trillion (US Department of the Treasury estimate)

Growth Multiple: approximately 6.5x over three years

Main Drivers: institutional adoption, regulatory clarity, cross-border payment demand

Recent Integration Cases: Western Union, SWIFT, MoneyGram, Zelle

From a geopolitical perspective, the race for stablecoin regulation is underway globally. The US has established a leading position with the GENIUS Act, and the EU’s MiCA framework has taken effect. Singapore, the UAE, and Hong Kong are advancing their own stablecoin regulations. If Canada does not follow suit, it risks falling behind and losing opportunities to attract stablecoin companies and related investments.

Economically, the stablecoin industry not only fosters financial innovation but also creates jobs, generates tax revenue, and spurs technological spillovers. US stablecoin issuers like Circle and Paxos already employ hundreds of people, pay substantial taxes, and promote blockchain commercialization. By providing clear regulation, Canada can attract similar enterprises and develop its domestic digital finance industry.

Impact of Clear Regulation on Canada’s Crypto Ecosystem

Although the document does not specify when the legislation will be submitted, it is part of a broader plan to modernize payments, enabling Canada’s 41.7 million people to conduct digital transactions more quickly, cheaply, and securely. This strategic positioning shows that the Canadian government views stablecoins as tools to enhance national welfare rather than mere regulatory targets.

For Canada’s crypto ecosystem, this is a significant positive. Clear stablecoin regulation will attract more companies, including stablecoin issuers, payment service providers, DeFi protocols, and wallet providers. Currently, Canada’s crypto ecosystem is relatively small, with key players like Wealthsimple and Coinsquare, far behind US or European exchanges. The introduction of stablecoin regulation could change this landscape, making Canada a second hub for digital finance in North America.

For Canadian users, regulated Canadian dollar stablecoins will offer safe, convenient, and low-cost digital payment options. Currently, Canadians relying on stablecoins mainly use US dollar stablecoins like USDT and USDC, which involve currency conversion costs and foreign exchange risks. The emergence of a local currency stablecoin will eliminate these frictions, making stablecoins a practical everyday payment tool.

For Canadian businesses, CAD stablecoins will reduce cross-border payment costs and improve efficiency. Canada’s extensive trade with the US, China, and Europe involves traditional bank wire transfers that typically take 2–5 business days and incur high fees. Stablecoins can enable 24/7 instant settlement with minimal fees, representing cost savings and increased competitiveness for industries like e-commerce, logistics, and manufacturing that rely on international trade.

Regarding the policy timeline, implementation starting in 2026–2027 suggests legislation could pass by late 2025 or early 2026. This provides about 1–1.5 years for market preparation, allowing businesses to adjust models, build compliance systems, and apply for licenses. International stablecoin issuers like Circle, Paxos, and Tether should begin engaging with Canadian regulators now to prepare for licensing opportunities.

As a G7 member and the ninth-largest economy globally, Canada’s stablecoin regulation will set an example and potentially influence other countries like Japan, Australia, and South Korea to accelerate their own processes. This global regulatory convergence will create a more favorable environment for cross-border stablecoin payments, as companies can operate under unified or similar rules across multiple markets rather than facing fragmented regulations.