The news: CAD Digital recently completed test transactions for its CADD stablecoin between Wealthsimple and National Bank of Canada.

CADD is expected to launch in Q1 as Canada’s first fully regulated stablecoin issued by a financial institution. Another Canadian dollar-backed stablecoin, QCAD, was approved in December but isn’t yet available per its issuer Stablecorp.

Why it’s worth watching: Canada’s draft Stablecoin Act, introduced in its Budget 2025 Implementation Act, is a key step toward a formal stablecoin framework. The proposed rules would create new opportunities for banks and fintechs, especially in cross-border payments.

Stablecoin regulation would also help Canada catch up to efforts in the US and EU. The US in particular has leapt ahead with stablecoins, moving quickly from unregulated issuance by crypto companies to the brink of regulated use under the GENIUS Act.

Trendspotting: Canada has fallen behind the curve on stablecoins partly due to a drawn-out rulemaking process. Open banking, for example, has taken more than seven years to come to fruition, and the government is still tinkering with legislation. In that same period, a US regulated open banking regime has come and gone, and European regulations have been in place since 2018.

Our take: Canada’s private sector shows promise with stablecoins, but overall competitiveness —and the banking sector’s role in driving adoption—remains uncertain and dependent on legal clarity.

The largest institutions may have an incentive to use stablecoins for interbank transactions and foreign exchange. But for now, it will be up to fintechs to lead the charge.