The adoption of the GENIUS Act in the United States, the first federal law on stablecoins, is pushing several countries to consider similar measures. Canada appears poised to follow this path, with reports indicating new regulatory provisions could appear in the next federal budget.
In brief
- Canada plans to include rules on stablecoins in the federal budget due on November 4.
- Discussions focus on their legal classification and ways to avoid capital flight to US dollar-backed tokens in the absence of a unified framework.
Towards a regulatory framework for stablecoins
According to Bloomberg, the Canadian Ministry of Finance and other public agencies have, in recent weeks, increased consultations with regulators and industry players in order to develop a clear framework for stablecoins. The objective is to integrate these measures into the federal budget that Finance Minister François-Philippe Champagne will present on November 4.
Canada does not yet have a unified legal framework for stablecoins. Authorities are debating whether they should be classified as securities or derivatives and looking for ways to prevent capital flows from migrating to US dollar stablecoins.
The market for stablecoins denominated in Canadian dollars remains limited for the moment. QCAD, issued by Stablecorp in Toronto, is one of the few domestic examples, fully backed by CAD deposits. In contrast, US dollar-backed stablecoins, such as USDC, remain accessible to Canadians, following the 2023 decision to cease support for Tether's USDt.
Industry and Bank of Canada call for more clarity
Financial experts and officials have long advocated for a clear framework, highlighting both the risks and opportunities that stablecoins represent for the Canadian financial system. Among the points raised:
- A regulatory delay could make Canadian bonds less attractive and reduce the Bank of Canada's control over the money supplyaccording to John Ruffolo, co-chair of the Council of Canadian Innovators.
- The absence of national options and clear legal guidelines could push capital out of the country.
- The Bank of Canada is also calling for a framework to be established to modernize the payment system and maintain the country's competitiveness in the field of digital payments.
Global dynamics around stablecoins
Canada's increased attention is part of a global trend of regulation of digital assets. In Europe, the MiCA (Markets in Crypto-Assets) regulation now sets a legal framework for issuers of stablecoins. In Asia, countries like Japan and Hong Kong are developing their own rules to ensure surveillance and protection of users.
Last June, US lawmakers passed the GENIUS Act, establishing full collateralization requirements, anti-money laundering measures and mandatory audits, to ensure the transparency and reliability of stablecoins within the financial system.
The global stablecoin market has seen spectacular growth, driven by evolving regulatory frameworks. According to data from CoinMarketCap, their combined capitalization reaches almost $316 billion, illustrating the growing influence of these digital assets on global financial markets.
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