The news: Canada published the draft of its Stablecoin Act as part of its Budget 2025 Implementation Act. It applies to stablecoins issued by entities that are not prudentially regulated.

Canadian issuers of stablecoins must hold reserves in bankruptcy-remote, high-quality liquid assets in the reference currency. Issuers are prohibited from offering interest on stablecoins.

Why it’s worth watching: The Canadian government’s stablecoin plans follow legislation abroad. The US has regulations for stablecoins under the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act and the EU under Markets in Crypto-Assets Regulation (MiCA). The GENIUS Act was the first US federal stablecoin legislation and has opened the door widely for banks and fintechs to advance their plans with digital assets.

For Canadian companies with crypto-related ambitions, regulatory clarity will create opportunities—but there may be a long way to go, and the ultimate impacts are unclear. The Stablecoin Act draft will move through the legislative process. Aspiring stablecoin issuers and related companies will need to align their compliance operations and business strategies: Canadian firms with cross-border operations in the US will face two stablecoin compliance frameworks.

Our take: For Canadian banks and fintechs, the impending legislation signals that stablecoins are normalizing everywhere as a regulated alternative to cash as a store of value and for electronic payments.

The use cases are particularly interesting for Canadian financial institutions and stablecoin issuers who will use stablecoins to move money across the US border: For people and businesses operating in both markets, transfers will be instant.