Key takeaways
How will the framework be financed?
The Bank of Canada will allocate $10 million over two years starting in 2026, plus $5 million annually from fees charged to regulated issuers.
Why does Canada now see the need to regulate stablecoins?
Stablecoins now account for around 30% of all crypto transactions, with global volumes exceeding $4 trillion, highlighting the need for stricter oversight.
Canada is taking a decisive step towards regulating digital finance.
As part of its 2025 federal budget, Canada’s Department of Finance proposed the country’s first national framework for fiat-backed stablecoins.
The plan, unveiled this week, would require all stablecoin issuers to have sufficient asset reserves and establish clear refund policies to protect users.
Canada federal budget
In addition to financial safeguards, the proposal also introduces enhanced privacy and national security measures for digital transactions.
The budget stated,
“The legislation will also include national security safeguards to support the integrity of the framework, so that fiat-backed stablecoins are safe for consumers and businesses to use.”
To support implementation, the Bank of Canada will allocate $10 million over two fiscal years beginning in 2026, with an additional $5 million in annual operating costs funded by regulated issuers.
Stablecoins: the spectacular cryptocurrency
Needless to say, stablecoins have quickly become a central element of the global crypto economy. They now account for nearly 30% of all transactions and more than $4 trillion in trading volume this year.
With more than 90% pegged to the US dollar, led by Tether [USDT] and circle [USDC]Canada’s proposed framework comes amid growing calls for stricter oversight to balance innovation with financial stability.
Additionally, Visa’s on-chain analytics data indicates a total transaction volume of nearly $49.1 trillion, while Standard Chartered predicts that up to $1 trillion could shift from emerging market deposits to US stablecoins by 2028.
However, while the budget mentions “national security safeguards,” it provides few details about how they will be implemented.
Seeing this, experts warn that even major stablecoins remain vulnerable to systemic shocks.
For example, Chainalysis pointed to the collapse of TerraUSD and major DeFi exploits in 2023 as evidence of weak collateralization and smart contract security.
These events spread across both traditional and DeFi markets, showing how quickly instability can spread.
Therefore, as more banks adopt stablecoins, Chainalysis warns that a major decoupling or hack could lead to broader financial losses.
Was the GENIUS Act a catalyst or a blocker?
Canada’s proposed stablecoin framework also mirrors the US GENIUS Act passed in mid-2025.
The GENIUS Act, backed by President Donald Trump, defined “payment stablecoins” and distinguished them from securities.
As the EU’s MiCA, Japan and South Korea promote similar rules, Canada is joining a growing effort for clarity.
But as Canada moves toward adopting stablecoins under a regulated framework, not everyone shares the optimism.
The US Banking Policy Institute (BPI) has recently renewed warnings about the potential risks of stablecoins and DeFi, citing recent market shocks like the $20 billion unpegging event as evidence of their systemic threat.
BPI argues that leveraged yield farming and uninsured deposits could amplify liquidation risks, although critics claim banks are more concerned about losing deposits to higher-yielding crypto products.
However, despite the skepticism, the stablecoin market continues to expand rapidly, suggesting that, with or without regulation, global adoption is already underway.