Canada Moves to Regulate Stablecoins in New Budget

The Canadian government has announced plans to regulate fiat-backed stablecoins as part of its 2025 budget. This move aims to establish a legal framework for issuing and using stablecoins in the country, enhancing oversight in a fast-growing area of digital finance. The government will allocate $10 million over two years to the Bank of Canada for this purpose. Proposed regulations will require stablecoin issuers to maintain adequate reserves and adopt risk management practices to ensure consumer safety. The legislation will also feature national security protections and pave the way for the Bank of Canada to oversee payment providers incorporated with stablecoins. As stablecoins currently account for 30% of global crypto transaction volume, Canada joins other jurisdictions, including the U.S. and the EU, in creating regulatory frameworks for these digital assets. Industry responses have been largely supportive, indicating potential for increased competition and reduced transaction costs in the Canadian payments landscape. However, some caution remains regarding the risks stablecoins may pose to financial stability and existing monetary frameworks.

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