Canada approves budget to promote stablecoin policy

The Canadian government has successfully passed a federal budget that introduces, among other things, a stablecoin policy.

Parliament narrowly passed Prime Minister Mark Carney’s first budget on Monday night. Deep within the lengthy document is a section governing the issuance of stablecoins overseen by the Bank of Canada. Although other procedural hurdles remain regarding certain provisions of the budget, this is a major victory for the new government. Reflecting many of the findings of recent U.S. legislation regulating issuers of USD-backed stablecoins, Canadian issuers must maintain 1:1 reserves “consisting exclusively of base currency or other high-quality liquid assets,” allow for immediate redemption, and meet a series of requirements regarding risk management, cybersecurity, disclosure and outage management. The Bank of Canada oversees and maintains a register of approved applicants.

Under the policy, non-bank stablecoin issuers are not allowed to offer customers “any form of interest or yield on their stablecoins, whether in the form of cash, digital assets, or other consideration.”

Liberal Premier Carney appeared at the Canadian Football League championship game over the weekend next to Coinbase Canada CEO Lucas Matheson, who argued that Canada’s approach to stablecoins could benefit from some changes.

He called it a “step in the right direction” in a statement Tuesday. However, he called for an “interim path forward to ensure that Canadian dollar-denominated stablecoins reach the market as quickly as possible and that issuers can share in the yield on stablecoin deposits.”

“These measures will position Canada to be globally competitive and help maintain the strength of the Canadian dollar’s global influence,” Matheson said.

While the global stablecoin market is dominated by tokens tied to the value of the US dollar, other countries and the European Union are looking to increase the presence of their national currencies.