Bank of Canada: Delays in Stablecoin Regulations Could Lead to Economic Isolation

The Bank of Canada has cautioned that postponing the creation of stablecoin regulations could leave Canada behind in the global race for financial innovation and competitiveness. With stablecoins now being used for about $2.7 billion in daily transactions and managing $1 trillion each year in international payments Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ], the central bank stressed that Canada’s payment systems must be updated to meet changing global requirements. The Bank pointed out that stablecoins, which are tied to fiat currencies and are less volatile than cryptocurrencies such as

, could significantly change payment methods, but strong regulatory measures are essential to manage potential risks Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ].

One major issue is that Canada is trailing the U.S. and Europe in creating stablecoin regulations. Deputy Governor Ron Morrow highlighted that money transfer fees in Canada are “noticeably higher” than those in other advanced economies, and stablecoins could potentially reduce these charges from 5–10% down to under 1% Bank of Canada Calls for Guardrails as Stablecoins Go Mainstream [ 2 ]. Lowering these costs would help both immigrant families and businesses that depend on cross-border payments. Still, the absence of a national regulatory framework for stablecoins—leaving only diverse provincial rules and anti-money laundering laws—leads to confusion for those in the market Canada Working on Regulations for Stablecoins, Bank Regulator … [ 3 ]. The Bank of Canada called on federal and provincial governments to create a unified set of rules similar to those in the U.S., where the GENIUS Act sets out reserve and transparency standards for stablecoin providers.

The central bank also noted the increasing importance of private sector initiatives in the adoption of stablecoins.

has already begun accepting stablecoins as a form of payment, and Tetra Digital Group is preparing to launch a Canadian dollar-backed stablecoin by 2026 Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ]. These advancements show the promise of stablecoins for boosting financial access and cutting transaction expenses. However, the Bank warned that without well-defined regulations, users may face liquidity issues and lack the protections offered by mainstream banks Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ]. Establishing a national regulatory system could help ensure that stablecoins are as trustworthy as bank deposits while promoting technological growth in finance Canada Working on Regulations for Stablecoins, Bank Regulator … [ 3 ].

Global regulatory initiatives, such as those from the Bank for International Settlements (BIS) advocating for stablecoin oversight within regulated frameworks, offer guidance for Canada’s approach Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ]. The BIS has also warned about the dangers of unregulated stablecoins, underlining the importance of international cooperation. Canada’s Office of the Superintendent of

(OSFI) is preparing to roll out a federal regulatory system for stablecoins once it is ready Canada Working on Regulations for Stablecoins, Bank Regulator … [ 3 ], an effort that could help Canada compete internationally. Nevertheless, analysts point out that Canada’s slow progress in updating its payment systems, compared to the U.S. and UK, could put its economy at risk Bank of Canada Calls for Guardrails as Stablecoins Go Mainstream [ 2 ]. Nearly 60% of Canadian executives believe the country’s economic standing will worsen if urgent regulatory reforms are not made Bank of Canada Calls for Guardrails as Stablecoins Go Mainstream [ 2 ].

The expansion of the Bank of Canada’s supervisory authority under the Retail Payment Activities Act shows its dedication to modernization. Now overseeing close to 1,500 payment service providers (PSPs), the Bank is implementing controls for risk and customer funds Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ]. These measures set the stage for safely integrating stablecoins into a robust payments network. At the same time, projects like the forthcoming Real-Time Rail system will quicken domestic fund transfers, adding to the advantages stablecoins offer for international payments Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ]. The Bank’s joint efforts with the BIS Innovation Hub in Toronto to explore artificial intelligence and digital assets also underline a commitment to enhancing long-term trust and efficiency Bank of Canada Urges Stablecoin Regulation to Keep … [ 1 ].