Canada has introduced a stablecoin regulatory framework in its 2025 federal budget, closely mirroring U.S. measures. The initiative aims to close legal gaps and prevent capital flight to foreign issuers, affecting issuers, corporate treasuries and derivatives markets that use these tokens as collateral. Core requirements include 1:1 reserves, clear redemption mechanisms and enhanced oversight by the Bank of Canada, with funding allocated for implementation.
The framework is planned for full implementation by November 2025 and requires issuers to maintain 1:1 reserves composed of liquid assets and segregated from operating capital. It also mandates efficient redemption channels and comprehensive operational and technological risk controls, as outlined in the budget.
The Bank of Canada will expand its supervisory role and receive $10 million for two years to manage the new regulatory burden. This expansion is designed to ensure consistent oversight of reserve quality, redemption processes and operational continuity.
Canada models much of its proposal on the U.S. GENIUS Act (signed July 18, 2025), which sets similar requirements: 1:1 reserves, a broad prohibition on rehypothecation and limits on offering direct yield to holders. The GENIUS Act also clarifies the legal classification of payment stablecoins outside securities or commodities regimes and creates a federal supervision threshold starting at $10,000 million of issuance. This alignment reflects a bet on prudential “light bank” rules that prioritize liquidity, holder protection and operational resilience.
Framework, timeline and U.S. alignment
Market projections cited in the budget estimate global stablecoin capitalization at around US$200 billion at the start of 2025, with scenarios rising to US$1–2 trillion by 2028, underscoring the sense of regulatory urgency.
The regulation will directly influence liquidity profiles and product design across issuers and institutional users. Requiring high-quality liquid reserves will likely increase demand for short-term instruments, which could strain near-term liquidity conditions as balance sheets adjust to the new standards.
For corporate treasuries using stablecoins as cash, counterparty risk is expected to decline thanks to holder priority in insolvency and stricter segregation of reserves. Clear redemption pathways should improve cash management predictability and settlement assurance.
Yield and rehypothecation strategies will be constrained by prohibitions and limits that reduce implicit leverage across DeFi ecosystems, reshaping how returns are generated and how collateral is deployed within on-chain and off-chain venues.
The next verifiable milestone is the rollout of the rules before November 2025, when reserve requirements and supervision processes must be operational, marking a structural change for issuers and institutional users of stablecoins. Related: Canada Moves to Regulate Stablecoins in 2025 Federal Budget, Mirroring US Approach.
