Canada’s crypto industry is raising red flags over the country’s sluggish approach to stablecoin regulation, warning that the current framework could leave it trailing behind the likes of the U.S., EU, and other forward-thinking jurisdictions.
Since the Canadian Securities Administrators (CSA) labeled stablecoins as securities or derivatives in late 2022—following the collapse of FTX and Terra—the digital asset space has operated under what some see as an overly cautious and fragmented regime. This has led to frustration among industry players who argue that the current stance is stifling innovation and discouraging local stablecoin issuance.
Morva Rohani, the founding managing director of the Canadian Web3 Council, expressed concern over the patchwork nature of regulation in Canada. “We’re dealing with a system where stablecoins are judged case-by-case, without a unified federal framework. It introduces massive uncertainty,” she said. This piecemeal approach, she argues, not only confuses issuers but puts Canada out of step with regions like the EU, where tailored regulatory efforts such as the Markets in Crypto-Assets (MiCA) framework have attracted stablecoin innovators.
Tanim Rasul, COO of the Canadian exchange NDAX, echoed these sentiments during a panel at the Blockchain Futurist Conference in Toronto on May 13. He pointed to MiCA and other global frameworks as models for Canada to follow. “They’ve recognized stablecoins as what they are—payment instruments. Regulate them as such, not like securities,” Rasul stated plainly.
This regulatory lag isn’t just a matter of competitiveness—it could have real economic consequences. With most stablecoins pegged to the U.S. dollar, some experts worry that continued inaction could undermine the Canadian dollar’s relevance both at home and abroad. Som Seif, founder of Purpose Financial, warned that without CAD-pegged stablecoin alternatives, Canadians and businesses will default to using USD-based options. “That kind of shift weakens the loonie’s standing over time,” Seif cautioned.
Stablecoins are particularly well-suited to peer-to-peer (P2P) payments, an area where Canada lags behind. While services like Interac e-Transfer are popular domestically, options for low-cost, cross-border transactions remain limited. Coinbase Canada CEO Lucas Matheson noted that Canadians face high fees and paperwork for simple wire transfers—challenges that stablecoins could help solve. “We need a Canadian stablecoin that makes everyday payments frictionless,” Matheson emphasized.
Despite the growing demand for digital payment alternatives, Canadians remain wary. A 2024 report from Payments Canada revealed that 91% of Canadians have never used crypto for payments, citing security concerns as a primary deterrent. Even with the idea of a central bank digital currency (CBDC), public enthusiasm is low—85% said they’d stick to their current payment methods.
Still, hope may lie in political leadership. With the Liberal Party securing another term under Prime Minister Mark Carney—a former central banker known for his cautious but not dismissive stance on digital finance—there’s potential for more pragmatic regulation. Carney has publicly acknowledged the utility of stablecoins for both retail and institutional payments, but insists on strong oversight. “In systemic payments, one failure is one too many,” he once said, referencing past financial crises.
According to Rohani, Carney’s leadership could steer Canada toward a more modern and competitive regulatory environment, especially if stablecoins are framed as a way to modernize payments and strengthen the Canadian dollar’s role in a digital economy. “We expect a balanced approach: open to innovation, but firm on regulation,” she said.
As other countries surge ahead, Canada faces a pivotal moment. The tools to catch up are within reach, but industry voices agree—it’s time to move beyond reactive regulation and start building for the future.
