KEYTAKEAWAYS
- Canada’s regulatory framework for cryptocurrency remains fragmented, with federal AML oversight and provincial securities laws, creating uncertainty for stablecoin issuers and trading platforms.
- Ron Morrow of the Bank of Canada stressed stablecoins must be transparent, well-regulated, and reliable, urging policymakers to develop a coordinated federal framework for regulation.
- Stablecoins could reduce costs, enhance payment efficiency, and complement real-time systems, but without clear rules, Canada risks falling behind in global digital asset regulation.
CONTENT
Canada is calling for clear stablecoin regulation. Bank of Canada urges safeguards to ensure safe, transparent, and competitive digital assets within Canada’s evolving financial system.
THE CURRENT STATE OF CRYPTOCURRENCY IN CANADA
Canada has maintained a cautious yet open stance toward cryptocurrency. Digital assets such as Bitcoin and Ethereum are not legal tender, but they are widely traded and increasingly integrated into financial markets. The Canada Revenue Agency treats cryptocurrencies as commodities for tax purposes, requiring individuals and businesses to report gains or losses as capital or business income.
Regulatory responsibilities are divided between federal and provincial authorities. At the federal level, anti-money laundering and anti-terrorist financing obligations fall under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, enforced by FINTRAC. Exchanges and wallet providers that qualify as money services businesses must register, implement compliance programs, and report suspicious activity.
Provincial securities regulators, such as the Ontario Securities Commission and Quebec’s AMF, oversee crypto asset trading platforms. If a digital token or service meets the legal definition of a security or derivative, it must comply with prospectus, registration, or exemption requirements. This dual structure creates a complex and sometimes fragmented regulatory environment.
RON MORROW’S CALL FOR ACTION
On September 18, 2025, Ron Morrow, Executive Director for Payments, Supervision and Oversight at the Bank of Canada, addressed the CPA Canada conference in Ottawa. His remarks placed particular emphasis on the future of stablecoin regulation.
Morrow observed that while cryptocurrencies such as Bitcoin are primarily speculative investments, stablecoins pegged to fiat currencies like the U.S. dollar or Canadian dollar could play a meaningful role in payments. Their relative price stability makes them more practical for cross-border transfers and everyday transactions.
He also warned that the absence of a clear regulatory framework poses serious risks. Stablecoins can only function as money-like instruments if they are safe and reliable. This requires strong rules for reserve management, independent audits, redemption rights, and consumer safeguards. Without such measures, public trust in stablecoins could be undermined.
WHY STABLECOINS MATTER
Stablecoins are digital tokens designed to maintain a consistent value by being backed one-to-one with reserve assets such as cash or government bonds. They combine the efficiency and programmability of blockchain technology with the stability of fiat currencies.
In practice, stablecoins could reduce the cost and time of cross-border remittances, streamline merchant payments, and enable innovation in areas like tokenized assets and decentralized finance. In Canada, where payment systems are still modernizing, stablecoins could complement the Real-Time Rail project and expand financial access.
Yet without effective oversight, stablecoins also present risks. Mismanaged reserves, liquidity shortfalls, or opaque practices could cause instability and erode public trust. Global examples of failed or de-pegged stablecoins highlight the importance of proper regulation.
REGULATORY GAPS AND CHALLENGES
Despite progress in regulating crypto asset trading platforms, Canada has yet to establish a clear national framework for stablecoins. Key challenges include:
- The absence of unified federal rules, leaving issuers uncertain about compliance.
- Limited consumer protection, as stablecoins are not covered by deposit insurance.
- No mandatory standards for reserve composition, audits, or public disclosure.
- The risk of falling behind other jurisdictions, such as the United States and European Union, which are advancing comprehensive digital asset legislation.
Morrow stressed that innovation should not be stifled, but effective safeguards must be in place if stablecoins are to reach their potential.
THE ROLE OF THE BANK OF CANADA
The Bank of Canada plays a central role in developing the country’s financial infrastructure. Its mandate includes ensuring safe and efficient payment systems, which increasingly involve digital assets.
Recent steps include requiring payment service providers to register with the Bank, ensuring minimum standards for risk management and consumer protection. The Bank has also studied the possibility of issuing a central bank digital currency, though no decision has been made.
Morrow’s comments confirmed that stablecoins are now a priority within this broader agenda. For the Bank, the central question is not whether stablecoins will exist, but under what rules they should operate.
LOOKING AHEAD
Canada’s cryptocurrency policy must evolve into a coherent framework that bridges federal and provincial responsibilities. Policymakers will need to decide how stablecoin issuers should be licensed, what reserves they must hold, how often audits should occur, and whether redemption rights should be legally enforceable.
Clear rules will not only protect consumers but also position Canada competitively in the global digital asset market. Without them, the country risks consumer harm and diminished influence in shaping the future of finance.
CONCLUSION
Canada’s cryptocurrency regulation is still in transition. While trading platforms face established rules under securities and AML laws, stablecoin oversight remains incomplete. Ron Morrow’s speech at the CPA Canada conference underscored the urgent need for a national framework.
Stablecoins have the potential to transform payments, lower costs, and improve efficiency across the Canadian economy. But they must be safe, transparent, and reliable if they are to gain widespread acceptance. By acting decisively, Canada can foster innovation while ensuring stability, striking the balance required for the future of digital finance.
