Privately-issued stablecoins—digital tokens designed to maintain a fixed value relative to a fiat currency—are often hailed as the next big leap in payments technology. They promise cheaper, instant, cross-border transfers, 24/7 settlement, and the efficiencies of blockchain infrastructure. But like any critical financial sector infrastructure, they need a regulatory framework that balances innovation and consumer protection and financial stability.
The budget lays the groundwork for such a framework. Yet, as with so many other financial modernization promises, the devil is in the details—and there weren’t many.
Some of the oft-touted benefits of stablecoins may sound redundant to everyday consumers. Canadians can already send money instantly via Interac e-transfer, and tap to pay with their phones. So why do we need stablecoins?
At their best, they can do two things better than today’s systems. First, they could make domestic payments cheaper by cutting out multiple intermediaries and layers of fees. For merchants, that could mean lower transaction costs than on card networks. For consumers, it could mean faster, cheaper, and more transparent transfers.
Second, they could make cross-border payments dramatically more efficient. Sending money abroad today can take days and incur high fees and exchange-rate spreads that eat into what’s received. Stablecoins operate across borders by design: a digital Canadian dollar or U.S. dollar stablecoin can move globally in minutes at near-zero cost. This could be a huge boon for individuals sending remittances or small businesses importing goods.
Before the Nov. 4 budget, Canada’s regulatory treatment of stablecoins took a securities-law lens, lumping them together with crypto tokens and speculative assets. That might make sense for coins used in trading or investment, but it misses the point for those designed for payments. The budget hinted at a shift, promising to “introduce legislation to regulate the issuance of fiat-backed stablecoins in Canada”, but did not go far enough in calling them payments instruments and differentiating them from those that do not fit this bill. Making this distinction crystal clear will be necessary to ensure issuers and users alike do not remain in a grey zone of uncertainty.
Other jurisdictions—from the United Kingdom to the European Union, and now the United States with its Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS) Act— are building regimes that treat stablecoins as part of the payments ecosystem, with clear rules for reserves, redemption rights, and operational safeguards. The government acknowledged a similar set of issues, highlighting the fact that “legislation will require issuers to maintain and manage adequate asset reserves, establish redemption policies, implement risk management frameworks, and protect the sensitive and personal information of Canadians.” But without the details, we risk repeating the pattern of open banking and retail payments reforms—long on ambition, short on follow-through.
We see two big concerns in not having a fully developed framework as soon as possible. The first is monetary sovereignty. If Canadians gravitate toward U.S. dollar–backed stablecoins—now formalized under the GENIUS Act—we could find ourselves conducting more and more domestic commerce in a foreign currency. Over time, that would weaken the role of the Canadian dollar in everyday transactions and, by extension, in monetary policy. Canada would still control its own interest rate, but that lever would matter less if the medium of exchange circulating most widely wasn’t ours. The government could mitigate this risk by ensuring taxes and public payments remain strictly in Canadian dollars, but that won’t fully solve the problem if private activity increasingly migrates to U.S. dollar tokens.
The second, and perhaps greater, concern is losing control over the payments infrastructure itself. If Canada doesn’t move fast, the technology and governance behind stablecoin payment rails will be designed, owned, and operated elsewhere—by foreign firms and under foreign rules. That would leave our economy dependent on external systems for core financial plumbing, from settlement to data security. In today’s economic environment, that seems unwise.
We are happy to see the government taking stablecoins seriously, especially in light of what is happening south of the border with the GENIUS Act. But time is running out. Without a clear, timely framework that distinguishes stablecoins used as payments from those used for speculation, Canada will cede both innovation and control to others.
Mark Zelmer, formerly with the Office of the Superintendent of Financial Institutions, the Bank of Canada, and the fInternational Monetary Fund, is a fellow-in-residence at the C.D. Howe Institute, where Jeremy Kronick is vice-president of economic analysis and strategy, and Peter MacKenzie is a senior policy analyst.