Federal budget expected to include first draft of Canada’s stablecoin framework
Ottawa is preparing to roll out draft stablecoin legislation as soon as December, as Canada seeks to catch up to U.S. moves that have pushed the fiat-backed digital asset into the mainstream.
According to three sources familiar with the matter, the proposed framework, which is expected to be unveiled in the federal budget on Tuesday and tabled before holiday recess, drew significant inspiration from the Genius Act in the United States.
But those who have seen the draft say they worry that the federal government’s legislation will fall short of clearly defining what the digital currency is and who oversees it.
The Globe and Mail is not identifying the sources as they were not authorized to speak on the matter.
Passed into law in July, the Genius Act sets out rules defining and policing stablecoins, a type of cryptocurrency pegged one-to-one to a fiat currency like the U.S. dollar or commodity such as gold. It allows payments to be sent and received instantly, just like texting.
A key question remains as to whether stablecoins will be defined as a payment instrument or security. The sources said they are concerned the draft legislation lacks a clear definition for the cryptocurrency.
A spokesperson for Finance Minister François-Philippe Champagne declined to comment on the contents of the federal budget.
In the U.S., stablecoins have generally been designated as payment instruments and regulation happens mostly at the federal level.
In Canada, digital currencies, which includes stablecoins and bitcoin, have largely been treated as securities, which are under the jurisdiction of provinces and territories. But they can also be characterized as a form of payment instrument akin to cash or credit, and so are overseen by the federal government, leaving lingering questions about regulatory authority in the absence of a clear definition.
The developments come as Canadian stablecoin issuers, industry groups and the Bank of Canada are urging Ottawa to establish a clear regulatory framework for the digital currency after the U.S. leapt forward in modernizing payments and legitimizing stablecoin transactions with the Genius Act.
“Governments are moving to regulate stablecoins and other cryptocurrencies so consumers can reap their benefits and be protected from credit and liquidity risk,” said Ron Morrow, the central bank’s executive director of payments, at a September conference in Ottawa.
Canada, he said, should “weigh the merits of federal stablecoin regulation, similar to what other countries have done.”
Bay Street financier John Ruffolo put it more bluntly in a September Substack post: “The rails by which digital money travels are being built by the United States,” he wrote. “Every time Canadians use a U.S. stablecoin, we’re funding U.S. government debt, enriching U.S. institutions.”
Since they’re typically pegged to a currency, stablecoins are more likely to avoid the same value fluctuations as other cryptocurrencies, making them more suitable for everyday transactions and often more appealing for businesses and governments than other cryptocurrencies.
Canadian companies have started to adopt the technology. Shopify launched a stablecoin payment option for merchants in June through a partnership with Coinbase and Stripe.
Calgary-based Tetra closed $10-million in funding to launch a Canadian-dollar-backed stablecoin in 2026. Loon, a startup also based in Calgary, has secured $3-million in pre-seed financing and launched a stablecoin this year.
The draft legislation is expected to set out requirements for safely issuing and operating stablecoins, including minimum capital thresholds and safeguards to protect Canadians holding and dealing in the cryptocurrency, said Eric Richmond, general counsel and head of business development at Shakepay, a crypto trading platform.
“It’s [about] creating a framework where companies can continue to innovate,” he said. “Not just proxying this entire thing to the banks where they can just issue stablecoins themselves, but actually providing the ability for the tech sector and for other innovative companies to play in this regime.”
Mr. Ruffolo, a proponent for a Canadian government response to the Genius Act, said in an interview, “We hope that they address the two key issues around the treatment of stablecoins as securities, and the need to treat stablecoins as deposits for regulatory purposes.”
But the goal should also be to differentiate from U.S. legislation by making trust a cornerstone of the framework, Mr. Ruffolo said. It should include rules such as full anti–money laundering compliance.
Without explicit language treating stablecoins as payment tools, not securities, it will be difficult for stablecoin providers to operate as intended, said Didier Lavallée, founder and chief executive officer of Tetra Digital Group, a digital asset company in Calgary.
Securities involve administrative and transactional barriers – such as disclosure requirements – that would restrict stablecoin from moving with ease like a currency.
Matthew Burgoyne, a lawyer who represents stablecoin issuers, said a major challenge will be the “jurisdictional complexity” between provincial securities regulators and federal payments oversight.
“We could have a situation where some of our clients are regulated by four different pieces of legislation,” he said. That includes the Retail Payment Activities Act, the new stablecoin law, FINTRAC money-services rules and securities regulations.
Kevin Zhang, CEO of Loon, said he anticipates a lengthy process of consultations after the federal budget, and possibly even a year until any proposed legislation becomes law.
But he’s optimistic. “If the government were to have their own version of the Genius Act, that actually shows a lot of leadership,” he said. “It shows they see the sovereignty of money moving onto the blockchain as important.”
This article was first reported by The Globe and Mail
