Key Takeaways
How will the framework be funded?
The Bank of Canada will allocate $10 million over two years starting in 2026, plus $5 million annually from fees collected from regulated issuers.
Why does Canada see a need for stablecoin regulation now?
Stablecoins now make up about 30% of all crypto transactions, with global volumes surpassing $4 trillion, highlighting the need for stronger oversight.
Canada is taking a decisive step toward regulating digital finance.
As part of its 2025 Federal budget, the Canadian Department of Finance has proposed the country’s first national framework for fiat-backed stablecoins.
The plan, unveiled this week, would require all stablecoin issuers to hold sufficient asset reserves and establish clear redemption policies to protect users.
Canada’s Federal budget
Alongside financial safeguards, the proposal also introduces enhanced privacy and national security measures for digital transactions.
The budget noted,
“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.”
To support implementation, the Bank of Canada will allocate $10 million over two fiscal years starting in 2026, with an additional $5 million in annual operational costs funded by regulated issuers.
Stablecoins: The crypto showstopper
Needless to say, stablecoins have quickly become central to the global crypto economy. They now account for nearly 30% of all transactions and over $4 trillion in trading volume this year.
With over 90% pegged to the U.S. dollar, led by Tether [USDT] and Circle [USDC], Canada’s proposed framework arrives amid rising calls for stronger oversight to balance innovation with financial stability.
Additionally, Visa on-chain analytics data indicate a total transaction volume of nearly $$49.1 trillion, while Standard Chartered predicts that up to $1 trillion could shift from emerging market deposits into U.S. stablecoins by 2028.
However, while the budget mentions “national security safeguards,” it provides few specifics on how they’ll be implemented.
Seeing this, experts are warning that even top stablecoins remain vulnerable to systemic shocks.
For instance, Chainalysis pointed to the TerraUSD collapse and major DeFi exploits in 2023 as proof of weak collateralization and smart contract security.
These events rippled across both DeFi and traditional markets, showing how fast instability can spread.
Therefore, as more banks adopt stablecoins, Chainalysis cautions that a major depegging or hack could trigger wider financial losses.
Was the GENIUS Act a catalyst or a blocker?
Canada’s proposed stablecoin framework also mirrors the U.S. GENIUS Act passed in mid-2025.
The GENIUS Act, backed by President Donald Trump, defined “payment stablecoins” and distinguished them from securities.
With the EU’s MiCA, Japan, and South Korea advancing similar rules, Canada joins a growing push for clarity.
But, while Canada moves toward embracing stablecoins under a regulated framework, not everyone shares the optimism.
The U.S. Bank Policy Institute (BPI) has recently renewed warnings about the potential risks of stablecoins and DeFi, citing recent market shocks like the $20 billion USDe depegging event as proof of their systemic threat.
BPI argues that leveraged yield farming and uninsured deposits could amplify liquidation risks, though critics claim banks are more concerned about losing deposits to higher-yield crypto products.
However, despite the skepticism, the stablecoin market continues to expand rapidly suggesting that, regulation or not, global adoption is already well underway.
