Canada lags with stablecoin approach, but there’s room to catch up
The slow adoption of stablecoins in Canada has some local crypto industry observers concerned that the country is falling behind.
The Canadian Securities Administrators (CSA) classified stablecoins as “securities and/or derivatives” in December 2022 after the FTX debacle that shook markets and turned many lawmakers against the crypto industry.
Regulating stablecoins as a security has seen few local stablecoin issuers arise, but in the United States and the European Union, softening regulations have seen significant growth in the stablecoin market. This makes Canada, observers say, less competitive with other jurisdictions.
Of particular concern is the perceived gap in peer-to-peer (P2P) payments in Canada, which stablecoins are uniquely qualified to fill.
Local law constrains stablecoin growth and threatens dollar
In 2022, as the crypto market reeled from the collapse of FTX and the implosion of the Terra stablecoin system, regulators worldwide began to look more critically at the crypto space.
In Canada, the CSA updated regulations for crypto exchanges and brought stablecoins under its purview, classifying them as securities/derivatives. This hasn’t been a popular decision with Canada’s crypto industry.
Morva Rohani, founding managing director of the Canadian Web3 Council, told Cointelegraph that the CSA’s case-by-case basis for considering stablecoin issuers and the lack of a federal framework make for a “patchwork” regulatory regime.
“Canada’s reliance on securities law to regulate payment stablecoins introduces significant legal and operational uncertainty,” she said.
Tanim Rasul, chief operating officer of Canadian crypto exchange NDAX, said that the CSA “got it wrong,” stating that other regulatory frameworks, like the EU’s Markets in Crypto-Assets (MiCA) law, were more appropriate.
“I would just say, look at MiCA, look at the way they’re approaching stablecoins. It’s a payment instrument. It should be regulated as such,” he told a crowd at the Blockchain Futurist Conference in Toronto on May 13.
It’s not just the EU. Singapore and the UAE have also introduced regulatory frameworks for stablecoins, and US senators are optimistic they will pass a stablecoin law by May 26.
Related: What are the next steps for the US stablecoin bill?
Rohani said Canada is “out of step with leading global jurisdictions […] which have adopted tailored, prudential frameworks that recognize stablecoins as payment instruments.”
This lack of alignment with other, more pro-stablecoin jurisdictions could have negative effects for the Canadian dollar (CAD), some worry.
Som Seif, founder of Canadian investment firm Purpose Financial, said that the proliferation of other major stablecoins, mostly denominated in the US dollar, could threaten the use of the loonie (a nickname for the Canadian dollar) at home.
“If Canada does not create the regulatory framework and environment that encourages the development of CAD stablecoins, consumers and businesses will default to using USD-pegged alternatives, eroding the relevance of CAD in global markets,” he said.
Stablecoins provide cheaper P2P payments but reputation is also a roadblock
Members of the Canadian crypto industry have stated that stablecoins have a role to play in the country as well, given the purported lack of P2P payment networks available in the country.
Speaking to Cointelegraph on May 13, Coinbase Canada CEO Lucas Matheson said, “It’s really important that we have a stablecoin for Canadians.” He said that the only options currently open were wire transfers, which “cost $45 and take 45 minutes of paperwork.”
Rohani said that Interac e-Transfer, a Canadian funds transfer service, “remains the primary domestic P2P rail, operating through banks and credit unions.”
Related: Stablecoins seen as ideal fit for real-time collateral management
Canada does have apps like PayPal and Wise, which support international P2P transfers, but those often come with high commissions and slow settlement times compared to stablecoins.
Rohani said that while some crypto platforms allow for P2P transfers, they’re not widely used due to a lack of integration into mainstream financial services.
Demand for more and different digital payment methods is growing in Canada, according to the 2024 digital payments report from Payments Canada, the owner and operator of Canada’s payment clearing and settlement infrastructure.
But that demand may not translate directly into stablecoins. Crypto’s “journey towards financial integration among Canadians remains a distant prospect,” the report reads. Some 91% of Canadians have never used crypto as a payment.
Payments Canada attributes the lack of interest to the assets being perceived as the “least secure payment method among Canadians compared to alternatives such as cash, credit cards, cheques, wire transfers and PayPal.”
Even in the context of a central bank digital currency, which the crypto industry generally regards as a less favorable option to private, fiat-denominated stablecoins, interest just isn’t there. The survey found that 85% of respondents “did not envision themselves using a digital Canadian dollar and preferred their existing payment methods.”
Is PM Carney pro-crypto?
If more tailor-made regulations could integrate stablecoins with the mainstream payment options Canadians are comfortable with, it would still take a concerted effort from policymakers in Ottawa, where the Liberals have just won the federal elections.
The crypto industry had cause for doubt. Liberal Prime Minister Mark Carney has previously expressed skepticism about cryptocurrency. In a speech as Governor of the Bank of England, he said they had failed as money.
Still, he acknowledged stablecoins have a role to play in retail and wholesale payments. He said in 2021 that stablecoins should have access to central bank balance sheets — but only if strong protections were in place.
“There’s been two systemic crises in money funds in little more than a decade […] In baseball, it’s three strikes and you’re out. In cricket, it’s only the equivalent of one. For systemic payment systems, one is too many,” Carney stated.
Kohani said, “With Mark Carney at the helm of the Liberal Party, we anticipate a pragmatic but regulation-first approach to crypto and stablecoins.”
While his previous openness toward stablecoins suggests he’s open to the technology, he also “emphasizes the need for regulation, oversight and safeguards.”
Another Liberal term, per Kohani, will likely mean the CSA continues to lead enforcement but could result in broader policy work, including a framework on stablecoins, “particularly if positioned as a tool for payments modernization and maintaining the relevance of the Canadian dollar.”
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Global foreign exchange and payments platforms are lobbying hard against stablecoins, which stand to significantly disrupt their business models, investor Kevin O’Leary said during a keynote address at Consensus 2025.
Legacy forex and payments platforms often extract large fees for servicing cross-border cash transfers and stand to lose out on revenue if regulated stablecoins become accepted as a cheaper, faster alternative, O’Leary said at the Toronto conference.
“Currency trading is a multi-trillion dollar market — and it’s old and ugly and inefficient,” O’Leary said, adding that “[ t]he biggest threat to that monopoly or oligopoly is a regulated stablecoin.”
“Once that’s approved, the multi-trillion dollar FX market becomes efficient, transparent, and inexpensive,” he said.
Stablecoin legislation
US lawmakers are working on legislation that stands to accelerate global stablecoin adoption, O’Leary added.
US Senators are aiming to pass the so-called Genius Act — a framework for regulating stablecoins — before the end of May. “As soon as the SEC approves the stablecoin act, every regulator in the US’s circle — Abu Dhabi, Switzerland, England — will follow,” O’Leary said.
“Who’s worried about this? The financial services industry. They hate this idea, and they’re working very hard to stop that bill from happening right now,” he added.
O’Leary said regulatory clarity for stablecoins may be a precursor to broader cryptocurrency reform that could potentially unlock trillions of dollars in institutional capital.
“When this language comes out, people will see really good refinement, a lot of progress, on things like consumer protection, bankruptcy protection, and ethics,” US Senator Kirsten Gillibrand said during an event hosted by Coinbase’s lobbying arm, Stand with Crypto.
As of May 15, stablecoins are collectively worth nearly $250 billion in market capitalization, according to data from CoinGecko. Tether’s US-dollar pegged stablecoin USDT is the leader, with a market cap of around $150 million, the data showed. It’s followed by Circle’s USDC, another US-dollar pegged stablecoin with a market cap of more than $60 billion.
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Coinbase chief legal officer Paul Grewal addressed some of the concerns raised by US lawmakers and industry leaders around President Donald Trump’s crypto ventures, and how they may affect related legislation.
Speaking at the Consensus conference in Toronto on May 15, Grewal said there had been “hiccups” in Congress since the Senate Banking Committee voted to advance the Guiding and Establishing National Innovation for US Stablecoins, or GENIUS Act, in March. Though Grewal said there were disputes over “substantial issues that need to be addressed” in the bill, he hinted that Trump’s involvement in the industry was a “complicating factor.”
“The discussion around the president’s support for a certain memecoin or two and other efforts does add a certain level of challenge to the effort to get Democrats and Republicans aligned on the right way to regulate the [spot market], but I have confidence that the Senate and the House are going to sort all that out,” said Grewal.
Democrats including Senator Elizabeth Warren explicitly called out the Trump family’s crypto venture, World Liberty Financial, and its USD1 stablecoin in opposing the GENIUS Act. However, some of the bill’s supporters, like Senator Kirsten Gillibrand, who proposed an earlier version of the legislation, said they would remove language specifically targeting the president’s crypto ventures.
Related: Democrats seek suspicious activity reports linked to Trump crypto ventures
Whatever the terms for modifications to the bill may be, many lawmakers still expect the Senate to take up another vote in a matter of days. Punchbowl reported on May 15 that Democrats “won major victories” after receiving assurances that some of their concerns around consumer protection, Anti-Money Laundering, and national security safeguards would be addressed.
First stablecoins, then a market structure bill?
The House of Representatives is also considering draft legislation for a digital asset market structure bill, a different iteration of the FIT21 bill that passed the chamber in May 2024. Democratic representatives have similarly pushed back on the legislation, citing “Trump’s crypto corruption.”
“I think we’re gonna learn a lot from the progress we see just in the next few days on stablecoins on the appetite to really tackle all these problems on any schedule that resembles the one that was laid out not long ago by the White House and certain leaders in Congress,” said Grewal.
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Stablecoin regulation is “the next catalyst” for the crypto industry and could lead to unprecedented “appetite from institutional investors,” according to Ash Pampati, head of ecosystem at the Aptos Foundation.
In an interview with Cointelegraph at Consensus 2025 in Toronto, Pampati said that “the whole world outside of the United States […] has already jumped onto this [stablecoins],” adding that “the US is […] at the doorstep.”
“I really think about new use cases that can emerge because of the borderless nature of stablecoins, because of the efficiency of the dollar onchain,” he said. “If you’re trying to send money to your friend in Nigeria, why do you have to go through a bunch of hoops?”
Stablecoins are often used to transfer money across borders, as they are easier and cheaper to transfer than traditional finance methods such as wire transfers. They are also used to hedge against fiat currency, which, in emerging markets, can devalue significantly in a short period of time.
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According to a new survey from Fireblocks, Latin America leads all regions in real-world use of stablecoins, with 71% of respondents saying they use the technology for cross-border payments. Half of respondents in the region, which encompasses a number of developing countries, say they expect stablecoins to offer lower transaction costs than traditional finance rails.
“I think you will see an amazing appetite from institutional investors […] we can really think, rethink the fintech space across B2B, B2C with fully onchain rails,” Pampati said.
86% of firms ready for stablecoins
According to Fireblocks’ survey, 86% of respondents say that their company shows “infrastructure readiness.” In other words, their companies are ready to adopt stablecoin. In addition, 75% of respondents say they see clear customer demand for stablecoins.
However, regulation still holds a large role in determining adoption. The survey shows that confidence in stablecoins is rising, not only because of the technology but also because regulatory barriers have fallen.
Agencies around the world have sought to regulate stablecoins. The progress has included the European Union’s MiCA regulation, various acts in the United Arab Emirates, and even the United States’ GENIUS Act, which reports indicate has regained some bipartisan support after a failed May 8 vote.
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