The Government of Canada managed to pass its federal budget in Parliament, which – among many other things – would establish a stable currency policy.
Parliament passed Prime Minister Mark Carney’s first budget by a narrow margin on Monday evening. The lengthy document contains an in-depth section that will regulate the issuance of stablecoins under the supervision of the Bank of Canada. Other procedural hurdles remain for specific provisions of the budget, but this is a major victory for the new government. Echoing several points of recent US legislation regulating issuers of US dollar-backed stablecoins, issuers in Canada must maintain one-to-one reserves “composed exclusively of the reference currency or other high-quality liquid assets”, allow immediate redemptions and meet requirements on risk management, cyber security, disclosure and management in times of failure. The Bank of Canada will oversee and maintain a registry of approved applicants.
Under this policy, non-bank stablecoin issuers will not be allowed to offer their customers “any interest or yield of any kind in respect of that stablecoin, whether in cash, digital asset or other consideration”.
Liberal Prime Minister Carney appeared at the Canadian Football League’s championship game over the weekend with Coinbase Canada CEO Lucas Matheson, though Matheson argues that the Canadian stablecoin approach could benefit from some changes.
He called it a “step in the right direction” in a statement Tuesday. But he called for “an interim path for CAD-denominated stablecoins to reach the market as quickly as possible, and allow issuers to share the yield on stablecoin deposits.”
“These steps will position Canada globally to be competitive and help maintain the Canadian dollar’s greater influence around the world,” Matheson said.
The global stablecoin market is dominated by tokens pegged to the value of the US dollar, although other countries and the European Union have sought to increase the presence of their own currencies.