Canada Is Finally Regulating Stablecoins

And here’s why it matters

, and

Nov 19, 2025

Canada is moving toward regulating dollar-backed stablecoins, and in this episode, Sabrina Maddeaux and Mike Moffatt break down what that means. They explain how stablecoins work, why Canada has been behind other G7 countries, and the potential benefits for payments and innovation.

Mike and Sabrina also discuss the balance between protecting Canadians and encouraging competition, and why clear rules could help Canadian fintechs thrive. A small step with big implications for the future of digital payments in Canada.

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Below is an AI-generated transcript of the Missing Middle podcast, which has been lightly edited.

Sabrina Maddeaux: Mike, we had a federal budget a couple of weeks ago, and I know afterwards everyone was asking you about housing, but buried deep inside the budget, the federal government also announced its intention to introduce legislation to “regulate the issuance of fiat-backed stablecoins in Canada.”

Now, I seem to remember just a couple of months ago, you released a paper with a recommendation that, and this is a quote, “Canada must, as soon as possible, create a clear regulatory framework for dollar-backed stablecoins.” Well, it seems like you got your wish. Is this what you were expecting?

Mike Moffatt: I have to admit, no. And it was so much not what I was expecting, I didn’t even look for it in the budget lockup. I was so obsessed with figuring out what was going on with housing. It hadn’t even occurred to me to look.

Yeah, I think we do need some disclosures on this paper. This was a paper that we wrote in conjunction with Canada 2020, with a supporting partner, Coinbase, which is obviously in the stablecoins space. Just for full disclosure, I do not own any of these stocks or any form of crypto assets. I thought it was an interesting topic because we are big fans, around here, of things like open banking, and giving Canadians access to different payment options and that kind of thing.

We pay a lot of money to a lot of big financial institutions, so anything that gives Canadians and the Canadian middle class additional options we think is very good. But of course, we have to make sure that Canadians and Canadian businesses are protected, that we have a decent regulatory system to make sure that people aren’t subject to fraud or things like that. So I was very, very happy to see this was in there, and I was not expecting it at all.

Sabrina Maddeaux: Let’s go back to basics for a second. Can you remind our audience what exactly a stablecoin is?

Mike Moffatt: Yeah, so a stablecoin is a type of cryptocurrency that’s designed to maintain a stable value, hence the stable part. So it’s typically pegged to something like the value of the US dollar or the price of gold.

For a dollar-backed stablecoin, the company that issues the stablecoin backs that stablecoin dollar for dollar with some other denominated asset, like a government bond. So let’s say a company issues a billion dollars’ worth of stablecoins. They hold in reserve a billion dollars worth of government bonds or similar safe assets to make sure that that cash is protected.

Now, because these stablecoins are stable in value, their use case is a whole lot different than other forms of crypto, say Bitcoin. Now, if you’re buying Bitcoin, most of what you’re doing that for is that you hope it rises in value like other scarce assets. With stablecoins, because they’re stable, you’re not going to make any money from them, but they work really well as a payment system. You can make low-cost, instantaneous payments to anyone in the world.

I saw a great analogy of this from the Bank of Canada. They said, imagine that you and I were going for lunch a month from now, and I was going to pay using Bitcoin. That’s like paying with shares of a tech company; it might be worth twice as much a month from now or half as much, so you’re kind of gambling. But with the stablecoin, I know that a month from now, if I hold $100 in a stablecoin, it’s going to be worth $100 a month from now, so I’m not risking or benefiting from day-to-day movements in the value of that currency.

Speaking of payments, let’s say you wanted to pay for something. You wanted to send money either within Canada or somewhere else in the world. Maybe you’re sending it to a friend, or you’re buying something from an online shop in Portugal or somewhere. What payment options would you consider right now to do that?

Sabrina Maddeaux: Obviously, credit cards, maybe debit, money transfers, e-transfers. Those are really the only ones that come to mind.

Mike Moffatt: Yeah, and those are the typical options, but all of those have significant drawbacks. So debit systems tend to only work in the country where you’re operating. I can’t send debit payments to a colleague in New Zealand or something.

Credit cards come with substantial fees, sometimes for the consumer, but a lot of times for business owners. I used to own a small business, and you would see one, two, three percent kind of coming off the top in those payments. Of course, the businesses pass those costs along to consumers. The U.S. National Retail Foundation did a study on this, and they found that the fees cost the average American family about $1,200 a year. So those are really expensive.

You mentioned wire payments or e-transfers internationally, and that’s another area where stablecoins could be very, very useful. So, let’s say you have a friend or family member who’s living in Romania or Rwanda and you want to send them $200. Well, you can’t simply send an e-transfer from your bank account. You usually have to send some kind of wire payment. It often costs $20 or more. Depending on the country that you’re sending to, you often have to go to a bank branch or to some kind of financial institution and do it in person. It’s expensive, it’s a massive hassle, it’s an absolute pain.

The real benefit of stablecoins is that you could send those 200 Canadian dollars, or at least something that’s redeemable for 200 Canadian dollars, instantly, at a minimal expense from an app on your phone. So that’s the real potential benefit of stablecoins. These instantaneous, very low-cost transfers of money, whether it be to somebody next door or somebody around the world.

Sabrina Maddeaux: Your paper made the point that Canada is behind when it comes to stablecoin regulation. What does that mean and why does it matter?

Mike Moffatt: We’re Canada, so we do this thing where we always compare ourselves to the other G7 countries, even though we’re the seventh largest of the seven. That tends to be our comparator group. If we look at every other G7 country, until the federal budget, all of them either had a regulatory system in place for the use of stablecoins as payment, or, in the case of the UK, some regulations and draft forms.

The rules set the conditions for companies that want to issue stablecoins for use as a payment. So the EU rules, for instance, allow the issuance of Euro-denominated stablecoins. The American rules allow for the issuance of American dollar stablecoins by American companies and so on. That creates the rule of the game, and right now, if you are a Canadian innovator, you really can’t start a company to issue stablecoins as a form of payment. Our regulations don’t allow for that.

By what they’re doing in the federal budget, this is creating new rules of the game while ensuring that consumers are protected. So, currently, Canadians can absolutely use US dollar-denominated stablecoins if they want to, but it means that they’re using products offered by American companies subject to the rules set in Washington.

In other words, by not having a regulatory system to allow for Canadian dollar stablecoins to be issued in Canada, we’re losing innovative companies to other countries. If you’re interested in being a stablecoin issuer, you’re not going to set up shop in Canada. We’re making it impossible to have Canadian dollar-denominated stablecoins, which is basically allowing the rules of the stablecoin game to be set in Washington rather than Ottawa.

In our view, it’s this lack of a regulatory environment. We’re outsourcing parts of our sovereignty. We’re saying to either Washington or Brussels, “Hey, you set the rules of the game, and we’ll have our consumers use your products set by your rules and your enforcement.”

In Canada, stablecoins currently exist in this weird regulatory gray area where they’re regulated as a financial security, like a stock on a stock exchange. Not only is that not really appropriate for a payment system, but because securities regulation is a provincial responsibility, any company that wanted to even try to offer a stablecoin, not necessarily for payment, but as an asset, had to go through 13 different provincial and territorial regulatory processes. They wanted to use something across Canada. So there’s also this weird kind of interprovincial trade barrier aspect to it.

Sabrina Maddeaux: Right. We talk so much about being able to fund innovation at home, but a lot of the time, we don’t allow it. I am curious, though, if Canada regulates stablecoins, wouldn’t they adopt basically the same rules as Americans anyway?

Mike Moffatt: There is a concern, yeah, that we may end up indirectly outsourcing our sovereignty to Washington by basically taking the Trump administration rules, taking a pen, crossing out US and putting Canada, but they wouldn’t have to. And in fact, I wouldn’t advocate for that.

So, for example, a rule we see in both the EU and the United States is that stablecoin issuers can’t have their stablecoins pay interest or have any other incentives associated with them. I don’t think that rule is necessary. I don’t see the need for it because, in my mind, it only seems to protect incumbent companies against competition.

After all, when I use my credit card, my credit card company gives me airline miles with every purchase. We all have, or many of us have, these incentive plans with our credit cards or debit cards or so on. So in my view, stablecoin companies and issuers should be able to do the same thing. You could imagine Canadian Tire offering a stablecoin. When you use the Canadian Tire stablecoin, you get Canadian [Tire]dollar points or something like that.

I think they should be able to do this. So this would be an area where I’d say, “No, actually, Canada probably shouldn’t blindly follow the rules set in Washington and Brussels.” I think we can come up with something better.

So speaking of protecting incumbents and how rules are often set to protect the big players from competition, I have to admit, I was skeptical that the Canadian government would ever make such a move to allow such a regulatory environment because our regulatory system really does seem to benefit existing big players at the expense of innovators.

So now it seems that my skepticism may have been unwarranted, that the Canadian government is, in fact, moving. Was I wrong to be skeptical?

Sabrina Maddeaux: No, you are right to be skeptical. You’re right in Canada that we often do protect the big players, and the entrenched banks have a lot of interest in continuing to charge the sorts of fees you were talking about earlier in the episode.

For example, in other countries, there are apps that will round up your purchases and then funnel that spare cash into a savings account for you. That’s a very good way to quickly and easily save money, but in Canada, this is impossible due to the lack of rules that require financial institutions to give you access to your own data in a format that’s actually usable by these apps.

There’s a lot of distance to go in this field, whether it’s stablecoin or open banking, to promote healthy competition that we’re lacking in Canada. We talk all the time - about Canada’s innovation and productivity problems. Allowing innovation and productivity and incentivizing it is step one to that. And that comes from freeing up markets, in my opinion.

Mike, do you have any last thoughts on that?

Mike Moffatt: Yeah, I couldn’t agree more.

We need more innovation. I’m very glad to see the federal government do this. As I think our viewers and listeners know, I was a little bit upset by the federal government’s lack of ambition on housing. So I have to give them kudos here that they have shown some ambition when it comes to stablecoins. And I think they deserve some credit for it.

Sabrina Maddeaux: A small win with a lot of work left to do.

Thank you, everyone, for watching and listening and to our amazing producer, Meredith Martin.

Mike Moffatt: And if you have any thoughts or questions about what it’s like to be in a budget lockup, please send us an email to missingmiddlepodcast at gmail.com.

Sabrina Maddeaux: And we’ll see you next time!