U.S. President Donald Trump signs the GENIUS Act, a bill that regulates stablecoins, on July 18. Regulatory inaction is pushing Canadians toward U.S. dollar-based stablecoins.Evan Vucci/The Associated Press
Ori Freiman is a post-doctoral fellow at McMaster University’s Digital Society Lab. Rafael Morales-Guzman is a doctoral candidate at the University of Saskatchewan and a fellow at the Centre for International Governance Innovation’s Digital Policy Hub.
As the U.S. Senate passed landmark legislation to regulate the digital American dollar, Canada’s slow response is an economic neglect, practically surrendering our economic future. Meet “stablecoins,” the technology underlying future payments.
Stablecoins are digital assets designed to maintain a stable value. They are primarily distinguished by two fundamental characteristics: the link that gives them value and how they maintain their stability.
Their value is usually pegged to a currency – commonly the U.S. dollar, a precious metal such as gold, or a mix of assets. The methods used to prevent value fluctuation range from holding one-to-one cash reserves to deploying smart algorithms that control the supply. This is how stablecoins avoid the price volatility that characterizes cryptocurrencies, making them more suitable for everyday payments and transactions.
For consumers and small businesses using stablecoins is like upgrading from snail mail to e-mail, but for money. Payments can be sent and received instantly, any time, including weekends, and across the globe – just like texting someone.
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The operational fees are expected to be much lower than those of traditional bank transfers. These reduced costs would finally enable micropayments on a large scale, so, for example, you could pay a few cents for just one news article instead of buying a subscription.
For buying products or sending money to other countries, stablecoins reduce expenses and time by cutting out costly middlemen and their processing times. Stablecoins facilitate near-instant cross-border transfers with fees, often below 1 per cent. All one needs is a digital wallet app and sound regulations to protect them.
For businesses and financial institutions, stablecoins represent a major upgrade to the traditional, slow and expensive plumbing of the global financial system. Instead of waiting days for large international payments to clear through traditional banking networks, companies can move millions of dollars nearly instantly, 24/7.
Stablecoin issuers will likely increase competition, meaning funds will no longer be “stuck in traffic,” allowing smarter, efficient, cheaper and more immediate money management. Beyond these, stablecoins are also “programmable money,” meaning they can be used to automate tasks like payroll or more complex payment workflows, leading to innovative financial products and services.
For Canada’s economy to become stronger and more independent, it’s time to rethink how regulation is done. Currently, the Canadian Securities Administrators classifies stablecoins as securities, similar to stocks or bonds, rather than a means of payment. This creates major roadblocks for digital payment innovations and for our economy to flourish.
First, it puts Canadian companies at a competitive disadvantage since they can’t easily accept stablecoin payments like their global counterparts. Second, it is a classic example of Canadian “innovation drain,” as promising Canadian fintech startups move elsewhere to grow. Third, this approach is out of sync with other jurisdictions that regulate stablecoins as a new form of payment. Fourth, this is a threat to our economic independence: the inaction pushes Canadians toward U.S. dollar-based stablecoins, an unnecessary capital drain.
This trend will likely accelerate because the Bank of Canada has no immediate plans to issue a public digital dollar. While a Bank of Canada-run digital currency comes with its own potential drawbacks, the policy vacuum leaves our market to foreign alternatives.
By treating stablecoins like investment products instead of a payment tool, Canada is essentially handing over the future of digital money to other countries. Canada’s top financial regulatory agencies are aware of this, collaborating on a framework for stablecoins.
For this effort to succeed, our regulators should start by legally defining stablecoins as a payment tool, bringing them under the watch of an updated Retail Payment Activities Act. Under this plan, only registered Canadian financial institutions could issue a stablecoin, and they would be required to back every digital coin with 100-per-cent cash-equivalent reserves.
To build public trust, these reserves must be regularly audited by reputable independent firms. Crucially, strong consumer protection rules would hold issuers legally and financially accountable for any funds lost to fraud, cyberthefts or operational failures.
Such a framework would provide the clarity needed to adopt new payment technologies responsibly. It would boost innovation and competition, allowing a privately-issued digital Canadian dollar to become the trusted choice for Canadians. Ultimately, this approach will secure Canada’s monetary sovereignty in the digital age.