Canada Announces First Federal Framework to Regulate FiatBacked Stablecoins in Budget 2025

Highlights

•        Canada’s 2025 Federal Budget includes legislation to regulate the issuance of fiat-backed stablecoins for the first time.
•         The Bank of Canada will retain CAD 10 million over two years to administer the new framework.
•         Amendments to the Retail Payment Activities Act will enable regulation of payment providers using prescribed stablecoins.

On 4 November 2025, the federal government released its latest budget, titled “Canada Strong”, introducing a significant milestone for digital asset oversight in the country. Budget 2025 confirmed that Canada will move forward with legislation to regulate the issuance of fiat-backed stablecoins, a step that had been anticipated following growing discussion around the need for clearer rules in the sector.

For the first time, the government formally announced its plan to establish a federal framework governing how stablecoins backed by fiat currency may be issued within Canada. The framework is intended to create a regulated environment around the design, issuance, and administration of these digital instruments.

New Legislation to Govern Stablecoin Issuance

Budget 2025 outlines several core requirements that will apply to stablecoin issuers once the legislation is implemented. Issuers will be required to maintain and manage adequate asset reserves aligned with the value of the stablecoins in circulation. They must also establish redemption policies, risk management programs, and measures to protect sensitive and personal information.

The legislation will also include national security safeguards. These measures are intended to support the integrity of the regulatory framework and ensure that fiat-backed stablecoins remain safe for use by both consumers and businesses.

Bank of Canada Assigned Administrative Role

To administer the new legislation, the Bank of Canada will retain CAD 10 million over two years, starting in 2026–27, from its remittances to the Consolidated Revenue Fund. Beginning after this period, annual administrative costs are projected at CAD 5 million, which will be offset by contributions from regulated stablecoin issuers operating under the Act.

Expansion of Regulatory Oversight in Payments

Budget 2025 also calls for amendments to the Retail Payment Activities Act, expanding the regulatory reach to payment service providers that perform payment functions using prescribed stablecoins. This extension is designed to align oversight of payment systems with the emerging use of digital assets and enhance consistency within the national payments regulatory structure.

Government Position on Stablecoin Innovation

The document describes the new stablecoin regulatory space as part of efforts to encourage safe digital asset innovation in Canada. By establishing federal oversight, the government aims to ensure that stablecoins are supported by quality reserves and operate under defined redemption procedures, with adequate measures for data protection and risk management.

Expected Benefits Across Demographics

Research conducted by the Financial Consumer Agency of Canada during 2023–2024 identified that men and younger Canadians are more likely to hold stablecoins compared with other demographics. With the creation of a regulated framework, Budget 2025 notes that these groups may experience greater direct benefits from enhanced security of their digital assets.