Canada lags with stablecoin approach, but there’s room to catch up

Canada’s slow stablecoin adoption is raising concerns, as the country lags behind the US and EU. The Canadian Securities Administrators (CSA) classified stablecoins as securities/derivatives in December 2022, hindering growth. This contrasts sharply with the more lenient regulations in the US and EU, which have spurred significant stablecoin market expansion. This regulatory divergence makes Canada less competitive.

A key concern is the potential for stablecoins to revolutionize Canada’s peer-to-peer (P2P) payment landscape. Currently, options like wire transfers are expensive and slow, while Interac e-Transfer, though widely used, operates through banks and credit unions. While international services like PayPal and Wise exist, they often involve high fees and slow processing. Stablecoins offer a potentially superior solution, but regulatory hurdles stifle their development.

Industry experts, including Morva Rohani of the Canadian Web3 Council and Tanim Rasul of NDAX, criticize the CSA’s approach. They argue that classifying stablecoins as securities is inappropriate and advocate for a framework similar to the EU’s Markets in Crypto-Assets (MiCA) regulation, which recognizes them as payment instruments. The lack of a comprehensive framework is creating uncertainty, hindering innovation and potentially harming the Canadian dollar (CAD). Som Seif of Purpose Financial highlights the risk that widespread use of USD-pegged stablecoins could diminish the CAD’s global relevance.

Despite the perceived need, Canadians remain largely unfamiliar with cryptocurrency payments, with only 9% having ever used them, according to Payments Canada. Security concerns contribute to this lack of adoption. Even the prospect of a central bank digital currency (CBDC) doesn’t significantly alter this sentiment, suggesting a deeper issue beyond just regulatory uncertainty.

The Liberal Party’s re-election, with Prime Minister Mark Carney at the helm, presents a mixed outlook. While Carney has previously expressed cautious optimism towards stablecoins, emphasizing the need for strong regulatory safeguards, his stance suggests a “regulation-first” approach. This could lead to continued CSA enforcement, but potentially also broader policy development, particularly if stablecoins are framed as a tool for modernizing payments and bolstering the CAD’s global standing.