Canada Faces Risks from Unregulated US Stablecoins in 2025: Urgent Regulatory Action Needed

• Why Is Canada Rushing to Regulate Stablecoins?
• How Are US Stablecoins Impacting Canada’s Economy?
• What Are the Systemic Risks of Unregulated Stablecoins?
• Can Canada Catch Up in the Global Stablecoin Race?
• What’s Next for Stablecoin Regulation in Canada?
• FAQs

Canada is accelerating its efforts to regulate stablecoins as the country grapples with the growing influence of unregulated US dollar-pegged stablecoins. With the federal budget documents set to be presented by Finance Minister François-Philippe Champagne on November 4, 2025, industry leaders like John Ruffolo, founder of Maverix Private Equity, are urging swift action to prevent capital flight and maintain financial sovereignty. This article delves into the risks, regulatory gaps, and potential solutions for Canada’s stablecoin dilemma.

Why Is Canada Rushing to Regulate Stablecoins?

Canada’s financial ecosystem is at a crossroads. John Ruffolo, a prominent figure in the digital asset space and deputy chair of the Council of Canadian Innovators, warns that without immediate regulatory action, Canadian capital could increasingly migrate south of the border. Ruffolo emphasizes that if Canadian dollar-denominated stablecoins aren’t regulated, savers might turn to US-based alternatives, which could shrink the domestic bond market and potentially drive up interest rates. "We’re seeing a clear shift where Canadian investors are opting for US stablecoins because they offer smoother cross-border transactions," Ruffolo notes. "But this comes at a cost—our monetary policy control weakens, and the US gains more influence over our financial data."

How Are US Stablecoins Impacting Canada’s Economy?

The GENIUS Act in the US has turbocharged demand for US Treasury bonds, as every new stablecoin must be backed 1:1 by government debt. Mirza Shaheryar Baig, a forex strategist at Desjardins, points out that this creates a self-reinforcing cycle: global institutions buy US bonds to mint digital dollars, further entrenching the dominance of the US financial system. "Over 99% of stablecoin value is now tied to the US dollar," Baig explains. "This isn’t just about convenience—it’s about who controls the money supply." For Canada, the stakes are high. Every transaction with a US stablecoin indirectly funds American debt and exports financial data to US institutions, making the Canadian economy more dependent on its southern neighbor.

What Are the Systemic Risks of Unregulated Stablecoins?

The Bank of Canada has flagged multiple red flags. Daily stablecoin transactions now hover around $2.7 billion, with annual usage nearing $1 trillion. Yet, these assets operate largely outside traditional regulatory frameworks. Carolyn Wilkins, former deputy governor of the Bank of Canada, argues that the lack of oversight exposes consumers to liquidity risks and undermines financial stability. "We need a legal framework that supports modern payments in Canadian dollars," Wilkins insists. The Bank for International Settlements (BIS) echoes this, warning that unregulated stablecoins could be misused for money laundering or destabilizing speculation.

Can Canada Catch Up in the Global Stablecoin Race?

Canada risks falling behind if it doesn’t modernize its payment systems. The Bank of Canada has acknowledged that other jurisdictions—like the EU and US—are already ahead in crafting stablecoin regulations. "If we delay, we’ll be forced to adopt systems designed elsewhere," a central bank spokesperson said. The proposed solution? A federal-provincial collaborative effort to create a national stablecoin policy, ensuring these digital assets are as reliable as bank deposits. The clock is ticking—industry experts suggest that Canada has a narrow window to act before US stablecoins become irreversibly entrenched.

What’s Next for Stablecoin Regulation in Canada?

The November 4 budget announcement could be a turning point. Observers expect measures to address the regulatory vacuum, possibly including stricter reserve requirements and consumer protections. For now, the message is clear: Canada must MOVE fast to safeguard its financial sovereignty. As Ruffolo puts it, "This isn’t just about keeping pace—it’s about who gets to write the rules of the future financial system."

FAQs

Why is Canada concerned about US stablecoins?

Canada fears capital flight, loss of monetary policy control, and increased dependence on US financial systems if its own stablecoins aren’t regulated.

How does the GENIUS Act affect Canada?

The GENIUS Act boosts demand for US debt, as stablecoins must be backed by Treasury bonds. This could divert investment away from Canadian markets.

What risks do unregulated stablecoins pose?

They expose consumers to liquidity risks, lack transparency, and could be used for illicit activities due to weak oversight.

What’s the Bank of Canada’s stance?

The central bank warns of systemic risks and advocates for a national regulatory framework to ensure stability.