Canada

Canada: The Federal Government 2025 Budget Proposes to Create a Legislative Regime Governing Fiat-Backed Stablecoins

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In brief

On November 4, 2025, the Federal government released its 2025 Budget called “Canada Strong” (“Budget 2025”) which signalled a major step toward regulating crypto assets in Canada. For the first time, and after much speculation that such a proposal was in the works, the federal government announced its intention to introduce legislation to govern the issuance of fiat-backed stablecoins. The proposed framework would aim to enhance consumer protection, strengthen national security safeguards and build trust in digital payment systems.

In depth

Budget 2025 was released by Prime Minister Carney’s government with the stated goal of, among other things, supporting innovation and global competitiveness.  As part of an effort to support innovation in the financial sector specifically, the government indicated that it would implement new legislative frameworks to “allow responsible innovation to flourish”.

One such legislative framework related to stablecoins. Generally speaking, a “stablecoin” refers to a crypto asset that is designed to maintain a stable value over time by referencing the value of a fiat currency or any other value or right, or combination therof. A “fiat-backed stablecoin” is a type of stablecoin that seeks to replicate the value of a single fiat currency where the issuer sets aside a reserve of assets denominated in the given fiat currency. There are many other types of stablecoins that exist beyond fiat-backed stablecoins (e.g., those backed by gold, a basked of fiat currencies, or algorithmic stablecoins), however, the proposed legislation is limited to regulating fiat-backed stablecoins only.

As set out in Budget 2025, the forthcoming stablecoin legislation will include requirements for issuers of fiat-backed stablecoins to:

  • maintain and manage adequate asset reserves;
  • establish clear redemption policies;
  • implement robust risk management frameworks; and
  • protect sensitive and personal information of Canadians.

In addition, to ensure the integrity of the system, Budget 2025 indicated that the legislation will incorporate national security safeguards, with the aim of making stablecoins safe and secure for consumers and businesses to use.  The forthcoming legislation is also intended to be limited to regulating stablecoin issuances by “non-prudentially regulated issuers” in Canada only.

Regarding the administration of the proposed stablecoin regime, according to Budget 2025, the Bank of Canada will administer the framework, which is expected to include a mechanism for charging fees to regulated stablecoin issuers.  The 2025 Budget also contemplates amendments being made to the Retail Payment Activities Act in order to enable the regulation of payment service providers that perform payment functions using prescribed stablecoins.

Going Forward

The announcement of forthcoming stablecoin legislation is a welcomed development by many in the blockchain and crypto asset community.  The 2025 Budget does not specify when the proposed legislation will be introduced in Parliament, leaving the timing uncertain. Canada’s approach is expected to closely mirror developments in the United States, where the GENIUS Act, which was recently passed by Congress on July 18, 2025, established a regulatory framework for fiat-backed stablecoins and enabled corporations to issue U.S. dollar-backed stablecoins. For more information see our GENIUS Act client alert here.

While the 2025 Budget creates a new regime to regulate stablecoins, it does not address a potential jurisdictional conflict with provincial / territorial securities laws.  Generally, payment activities fall under federal oversight, while securities matters are regulated at the provincial / territorial level. To date, Canadian securities regulators have treated fiat-backed stablecoins as securities and/or derivatives (see CSA Staff Notice 21-332and CSA Staff Notice 21-333) which will require coordination with the federal government’s proposed legislative regime to eliminate unnecessary overlap and ensure jurisdictional alignment.  

Tiana Gleason, articling student, has contributed to this update.

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Michael serves as the head of the Financial Services Regulatory Practice for Canada and is a Transactional Partner in Baker McKenzie's Toronto office. His practice focuses on financial regulation and compliance for fintechs, financial institutions and market participants and their business in Canada. When not acting for clients, Michael lectures students at the University of Montreal on corporate and securities laws and in preparing for case competitions. He is a co-author of the Annotated Bank Act (2023 edition) and the Jurisclasseur en valeurs mobilieres, a leading publication on securities laws. Michael is a chartered professional accountant and has worked as an inspector with the Autorité des marches financiers (AMF) and an auditor with the Office of the Auditor General of Canada.

Author

Usman Sheikh is Chair of the Blockchain & Fintech Practice. He is a Transactional Partner in Baker McKenzie's Toronto office and is also a member of the Firm's Litigation and Government Enforcement Practice Group. A highly regarded thought leader on blockchain and distributed ledger technology, Usman has briefed the offices of several prime ministers, as well as ministers, on blockchain's disruptive power, and is regularly invited to speak to business leaders and at global blockchain conferences throughout the world.

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Biography Carole Turcotte is a partner in the Corporate Transactions Practice Group in Baker McKenzie's Toronto office. With over 25 years of experience as a corporate lawyer in both in-house and private practice roles, she focuses on capital markets, mergers and acquisitions, private equity and investment funds. Carole guides clients through complex domestic and multi-jurisdictional transactions, as well as regulatory challenges, helping them achieve strategic objectives. Practice Focus Carole advises public and private companies on a broad spectrum of transactional and regulatory matters, including public offerings, private placements, mergers and acquisitions, corporate reorganizations and restructurings, joint ventures, plans of arrangement, takeover bids, and reverse takeovers. She also provides counsel on minority shareholder protections, stock exchange listings, and the drafting of complex commercial agreements. Additionally, Carole assists clients with continuous disclosure obligations, corporate governance, and regulatory compliance, including exemption applications. In her investment funds practice, Carole advises investment fund managers and portfolio managers throughout fund formation, offerings, operations, and investment transactions. This includes drafting and negotiating a wide array of documents tailored to clients’ structures and strategies. She also advises dealers and advisers on registration and offering requirements under applicable securities laws. Carole's natural resources practice centers on mining companies, covering all phases of their operation, from exploration and development to production and reclamation. She offers guidance on financings, purchase and sale agreements, offtake arrangements, royalty and joint-venture agreements, permitting, transportation agreements, procurement contracts for mining equipment, reclamation agreements, and impact and benefit agreements with First Nations. Leveraging hands-on operational experience gained during a secondment to one of Quebec’s largest mining companies, Carole delivers practical, industry-informed advice that helps clients navigate operational and legal complexities effectively.

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