Canada is taking a decisive step towards regulating stablecoins within its financial system. The 2025 federal budget proposes national legislation to govern fiat-pegged stablecoins, aiming to make them safer for consumers and more transparent for businesses. This move follows months of discussions between government officials, regulators, and industry players and reflects Canada’s commitment to keeping pace with global efforts in bringing clarity to the digital asset economy. The new framework seeks a balance between fostering innovation and ensuring accountability. 5 Key takeaways: 1) Regulatory Standards for Issuers: The legislation will require stablecoin issuers to hold adequate reserves, establish clear redemption policies, and implement robust risk management frameworks. These measures aim to guarantee security, trust, and full redeemability of fiat-backed stablecoins. 2) National Security Measures: In a move to protect against misuse or systemic risks, national security safeguards will be embedded into the framework. 3) Financial Sustainability: The Bank of Canada will manage the framework with an initial $10 million investment from its Consolidated Revenue Fund and ongoing costs estimated at around $5 million annually, funded by fees from regulated stablecoin issuers, ensuring cost-efficiency. 4) Expanded Regulatory Reach: Amendments to the Retail Payment Activities Act will cover payment service providers using stablecoins, closing existing gaps in oversight and ensuring consistent regulatory scrutiny for both traditional and digital payment systems. 5) Collaboration and a Balanced Approach: Officials from the Department of Finance and other agencies have held deep discussions with stakeholders to define stablecoin classifications, aiming to prevent capital flight toward U.S.-based tokens. This collaborative approach ensures responsible development in the digital assets space. 6) A Global Trend: Canada’s move follows the US GENIUS Stablecoin Act passed in July, shaping global regulations around fiat-backed digital assets. 7) A Focus on Innovation and Trustworthiness: The Canadian government is aiming to build a trustworthy environment for fintech growth while maintaining strong consumer protection measures. By introducing clear rules and accountability, the government aims to foster responsible development of digital assets rather than stifle them.