Federal Budget 2025: Ottawa to regulate stablecoins, advancing Canada’s digital dollar era

The Federal Budget 2025 marks a turning point in Canada’s approach to digital assets, announcing a national framework to regulate fiat-backed stablecoins. The framework aims to legitimize stablecoins as a form of payment and lay the groundwork for what advocates are calling Canada’s “digital dollar era”.

Key measures

• New federal legislation will regulate the issuance of stablecoins and bring them under Bank of Canada oversight.
• Issuers will be required to maintain adequate, high-quality reserves, establish redemption and risk management policies, and meet national security and data protection standards.
• Related amendments to the Retail Payment Activities Act will extend federal supervision to stablecoin-based payment providers.
• The Bank of Canada will spend $10 million over two years to administer the regime, with ongoing costs recovered through issuer fees.

Significance

The framework responds to industry calls for clear, proportionate rules and addresses concerns that Canada was falling behind the U.S., which introduced similar regulation under the Genius Act earlier this year. By recognizing stablecoins as payment instruments rather than securities, Ottawa signals support for innovation in the digital payments ecosystem while reinforcing consumer protection and financial stability.

Regulatory uncertainty

Absent from the budget was clarity on how stablecoin activity by banks will be regulated. Legal observers note that the framework does not yet delineate which aspects of stablecoin activity will fall under federal oversight versus provincial securities regulators, leaving a gap that could create short-term uncertainty for financial institutions exploring digital asset products.

Next steps

Draft legislation and consultations are expected in late 2025 or early 2026, with implementation likely beginning the following fiscal cycle. Market participants, including stablecoin issuers, payment providers, and financial institutions, should begin assessing compliance readiness in areas such as reserve management, data compliance structures, and redemption policies.

Conclusion

Ottawa’s move to regulate stablecoins marks a pivotal step toward modernizing Canada’s financial system and aligning its digital asset oversight with that of its global peers. While important details around bank participation and jurisdictional boundaries are not yet defined, the proposed framework signals clear federal intent to regulate fiat-backed stablecoins. If you have any questions, contact a member of our Financial Services team for assistance.