Canada Moves to Regulate Stablecoins in New Budget

Canada announced in its 2025 budget plans to create a legal framework for the issuance and use of fiat-backed stablecoins. The government allocated $10 million for the Bank of Canada to administer these new regulations over the next two years. The framework will enforce requirements for issuers to maintain adequate asset reserves, establish redemption policies, and ensure privacy protections for users. With stablecoins now comprising about 30% of global crypto transaction volume, amounting to over $4 trillion in 2025, the initiative aims to enhance oversight in a rapidly growing sector. The Bank of Canada will supervise this new regulatory regime, adjusting its administrative costs with fees from regulated issuers. Industry reactions have been predominantly positive, with proponents stressing this regulation could lower transaction costs and increase competition in the payments market. However, concerns remain regarding potential overlapping regulations and risks associated with stablecoins, as highlighted by the Bank for International Settlements.

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