Stablecoins: Canada needs clear regulation to thrive

Executive Summary

Stablecoins are blockchain-based tokens pegged to traditional assets such as the US dollar, the Canadian dollar, or gold. They can move value across the world instantly, transparently, and around the clock. But more than 97 percent of the international market is US dollar-backed, and if Canada delays a clear regulatory regime, privately managed US dollar stablecoins will dominate here by default.

This policy note, authored by Transactix CEO Ali Abou Daya and published by CIGI, argues that Canada needs framework regulation now. It sets out why the decision cannot wait, what other jurisdictions have already done, where Canada stands today, and the core principles a Canadian stablecoin framework should be built on. The goal is to balance innovation, investor protection, and monetary sovereignty.

Why regulation cannot wait

Between 10 and 40 percent of Canadians have owned or traded crypto tokens in the past five years, much of it already settled in US dollar-pegged stablecoins that bypass domestic payment rails. A regulatory vacuum creates four immediate dangers.

• Consumer and investor riskWithout clear rules, Canadians face direct losses when issuers fail or pegs collapse, and confidence in the underlying technology erodes.
• Illicit financeDelayed regulation and underinvestment in analytics postpone the ability to detect and deter criminal flows, leaving illicit finance an after-the-fact problem.
• Monetary sovereignty erosionWidespread use of US-pegged tokens weakens the Canadian dollar in everyday transactions and the Bank of Canada’s ability to steer the money supply.
• Predatory acquisitionsUndefined rules leave domestic firms as easy targets for foreign takeovers. The Robinhood acquisition of WonderFi is the cautionary example.

Lessons from abroad

Canada is not starting from scratch. Europe’s Markets in Crypto-Assets regulation (MiCA), in effect since June 2025, requires 1:1 high-quality reserves, quarterly third-party attestations, and strict operational standards. In the United States, the GENIUS Act imposes bank-like requirements and 100 percent reserves on US dollar stablecoin issuers, consolidating market power among a few large players and raising barriers for foreign entrants.

In Asia, Singapore licenses stablecoins as payment tokens under a tiered, sandbox-friendly regime with RegTech-based reporting to its regulator. China’s digital yuan pilot has demonstrated programmable compliance and direct cross-border settlement that cut remittance costs by up to 90 percent. Each offers Canada a tested reference point.

The state of play in Canada

As of mid-2025, Canada has no unified stablecoin framework. Federal and provincial authority overlaps, there is no dedicated licensing regime for issuers, and permissionless chains and foreign bridges leave FINTRAC and the Bank of Canada without a consolidated view of flows.

Decentralized lending and trading sit largely outside existing rules. Fintechs are moving research offshore to jurisdictions with established sandboxes, and Canadian users transact mostly in USDC and USDT, sending fee revenue and economic activity out of the country.

Principles for a Canadian framework

Effective regulation has to do two things at once: protect Canadians from financial and operational risk, and give innovators room to modernize the country’s payment rails. The note proposes a framework built on the following principles.

• Onshore conversionCAD transactions routed through foreign-backed stablecoins redeem through a regulated Canadian exchange, preserving visibility into FX flows.
• Final CAD redemptionAny Canadian user transacting in a non-CAD stablecoin can redeem into Canadian dollars within Canadian jurisdiction.
• Reserve transparency and custody100 percent collateralization in high-quality liquid assets held in trust, with quarterly third-party attestations and public disclosure.
• Licensing and supervisionA designated authority licenses and supervises CAD stablecoin issuers, with capital buffers, cybersecurity standards, and periodic audits.
• AML/CFT and consumer protectionMoney-services rules extend across issuance and redemption, with digital-ID KYC at every ramp and clear disclosure of fees, limits, and terms.
• InteroperabilityCAD settlement accounts at Canadian banks, integrated with Payments Canada’s real-time rail for instant on-chain and off-chain conversion.
• International coordinationReserve, audit, and AML standards align with MiCA and the GENIUS Act, with mutual recognition for cross-border transfers.
• Innovation and a level fieldA regulatory sandbox with tiered capital and audit requirements so credit unions and fintech startups can compete.

The Robinhood and WonderFi lesson

In May 2025, Robinhood acquired WonderFi, the parent of Bitbuy and Coinsquare, for CAD $250 million, folding platforms holding more than CAD $2.1 billion in custody into US-centric rails. The note argues that regulatory uncertainty and the difficulty of operating in Canada pushed a capable domestic team into a subpar deal and handed the market to an aggressive foreign player. It is a concrete illustration of the predatory-acquisition risk a regulatory vacuum invites.

Conclusion