Resilience amid uncertainty: 2025 Canadian capital markets review

On February 12, 2026, the Canadian Securities Administrators (CSA) published its 2025 Systemic Risk Committee Annual Report on Capital Markets (Annual Report). The Annual Report is issued annually by the CSA's Systemic Risk Committee to assess key risks and emerging trends affecting Canadian capital markets and to provide guidance for issuers and market participants.

The Annual Report emphasizes that Canadian capital markets remained broadly resilient in 2025 despite geopolitical trade shifts, episodic volatility, and the growing integration of artificial intelligence.

In this article, we discuss five key findings from the Annual Report that Canadian issuers should be aware of as they navigate evolving market conditions.

Artificial intelligence and implications for financial stability

AI is increasingly being adopted across financial markets for functions such as asset allocation, trading, and fraud detection, with the potential to enhance productivity and market competition. The CSA notes that the sector is highly concentrated among a small number of major providers and that these players control a majority of critical cloud infrastructure, GPU computing, and other core AI models. The Annual Report further states that this concentration creates systemic dependencies and exposes issuers to technical disruptions or cyberattacks that could impact large sectors of the AI market.

The CSA believes issuers should be mindful that the widespread reliance on AI systems, combined with growing cyber threats, including social engineering and deepfakes, may amplify market volatility and expose financial systems to new forms of instability.

Impact of geopolitical tariffs on corporate bonds

The Annual Report notes that Canadian non-financial corporate bonds demonstrated resilience despite US tariff shifts in 2025. That said, the CSA acknowledges uncertainty surrounding trade policy reversed the credit upgrades seen in early 2025, with downgrades modestly outpacing upgrades by mid-year, particularly in the materials and technology sectors.

Net issuance patterns were similarly volatile. The Annual Report discloses a sharp mid-year decline in bond issuances followed by a year-end rebound, driven by issuers seeking financing for supply chain adjustments and trade diversification strategies.

The CSA believes the outlook for capital markets participants remains uncertain if market conditions do not improve in 2026.

Given these market dynamics, the CSA notes that refinancing pressures are expected to intensify in 2026 as many firms approach their refinancing deadlines. The Annual Report advises issuers to be aware of elevated refinancing pressures in industrials and consumer cyclical sectors and recommends issuers consider extending the duration of near-term debt maturities to reduce exposure to refinancing risk.

Key role of stablecoins in the crypto ecosystem

The Annual Report also highlights the fact that the crypto asset sector expanded significantly in 2025, with global market capitalization reaching approximately USD4.4 trillion and stablecoins exceeding USD300 billion. In response to this growth, the Annual Report notes that regulatory frameworks are developing across international jurisdictions. In Canada, the federal government introduced the Stablecoin Act, which aims to make stablecoins safer to hold and use by requiring issuers to maintain proper reserves, offer redemption at par, and meet governance and data security standards.

As the stablecoin sector grows, the CSA believes the concentration of market share among a small number of issuers has the potential to heighten cyber, operational, and financial stability risks. A sudden loss of confidence in a major stablecoin, for instance, could prompt large-scale government securities sales and disrupt money market liquidity. Despite this, the Annual Report notes that stablecoins do not currently pose a systemic risk globally. However, issuers are encouraged to evaluate the risk of contagion if redemptions spike, particularly given the growing link between stablecoin reserves and traditional securities markets.

The Annual Report also discusses the progression of regulatory developments at the provincial level. In November 2025, the Ontario Securities Commission (OSC) approved a final prospectus for QCAD Digital Trust to distribute a fiat-backed stablecoin pegged to the Canadian dollar on a 1:1 basis. In connection with the transaction, the OSC granted QCAD exemptive relief from certain prospectus and continuous reporting requirements, establishing a tailored framework for stablecoin distribution in Canada. Building on this development, the Annual Report affirms that the CSA views fiat-backed crypto assets as generally securities and/or derivatives. This regulatory classification has significant implications for market participants.

Keeping this regulatory evolution in mind, the CSA believes Canadian issuers should focus on how future regulations under the proposed Stablecoin Act may govern them, including rules and exceptions for reserve assets and disclosure requirements.

Fixed-income market liquidity: Mutual funds and exchange-traded funds

The Annual Report highlights that liquidity in Canadian fixed-income markets remained stable in 2025 despite episodes of volatility and selling pressure in some markets. According to the report, trading volumes and bid-ask spreads in both government and corporate bond markets returned to normal levels following fluctuations triggered by US tariff announcements in April 2025.

Fixed-income mutual funds experienced steady and positive net flows in 2025. While underlying markets may be less liquid during times of economic uncertainty, the Annual Report notes that credit quality declined only minimally, remaining stronger than in the post-COVID-19 period.

Looking ahead, the Annual Report discloses the fact that the CSA will continue to monitor market-quality indicators. In light of this ongoing oversight, the Annual Report advises issuers to remain prepared for market developments that may impact debt issuance, refinancing options, or liquidity conditions.

Liquidity pressure on private asset funds

The Annual Report also notes the rapid expansion of the Canadian private asset fund sector in 2025, with the number of investment fund managers (IFMs) offering these products rising 40 percent since 2020, and total net assets reaching USD152 billion by the end of 2024. This growth was concentrated primarily in private equity, private debt, and real estate.

During this growth, however, some funds, especially real estate funds, experienced liquidity pressures that led several IFMs to suspend or limit redemptions. The Annual Report notes these pressures arose from mismatches between the redemption terms offered to investors and the liquidity of underlying assets.

The CSA believes these liquidity challenges highlight potential effects on capital availability, investor demand, and secondary market conditions in the growing private fund market. The Annual Report advises issuers to assess their exposure to private asset funds and consider the liquidity profiles of the funds in their portfolios.

The CSA reminds issuers to monitor potential secondary market impacts, such as new legislative restrictions or geopolitical developments, to ensure any related liquidity risks are properly disclosed to investors in a timely and transparent manner.

For assistance in navigating how these developments may affect your obligations as a Canadian issuer, please contact a member of our Equity Capital Markets team.