Bank of Canada Advocates For A Swift Stablecoin Regulation Amid Market Boom

The stablecoin market is expanding rapidly worldwide, and governments are working to update their rules to keep pace. In Canada, the Bank of Canada is urging decisive action, calling on federal and provincial regulators to collaborate and move quickly in establishing clear rules for these digital assets.

Addressing Cryptocurrency Volatility with Stablecoins

Ron Morrow, the Bank of Canada’s executive director for payments, supervision, and oversight, addressed the Chartered Professional Accountants conference in Ottawa. He stressed that any serious discussion of payment innovation must consider cryptocurrencies , as they are reshaping how people view money and transactions.

While Bitcoin remains popular, Morrow noted, its price swings make it far too unstable for everyday payments. Because of this volatility, very few people rely on it for routine purchases. This has created a clear need for alternatives that can offer more predictable value.

Stablecoins address this need by linking their value to stable assets, such as national currencies, making them more reliable for everyday use. Morrow noted that while cross-border payments require speed and lower costs, these solutions must also be safe and dependable, ensuring users can rely on the stability of their transactions.

There is a pressing need for faster, cheaper, more transparent and more accessible cross-border payments services. But these services also need to be safe and secure.

Ron Morrow

The executive director also recognised the growing role of stablecoins, noting that their use has expanded in recent years and now totals roughly $1 trillion in annual transactions.

Clear Rules Needed as Stablecoins Surge

Morrow stressed that federal and provincial regulators need to work together on clear stablecoin rules, noting that for them to be considered real money, they must be as safe and stable as the funds people keep in their bank accounts.

The call comes as interest in these digital assets is rising sharply, a period referred to as “stablecoin summer”. Much of this growth has followed developments in the United States, where the recent GENIUS Act established clearer rules for their regulation.

The legislation has provided the market with greater certainty and paved the way for wider adoption. Stablecoins now have a market capitalisation of over $305 billion , according to CoinMarketCap.

Canada’s Payments System

While Canada continues to assess its own approach, critics have often described the country’s payment network as falling behind international peers . Some point out that it trails not only advanced economies such as the United Kingdom and Australia but also certain developing nations. The concentration of the system among Canada’s largest banks has also been linked to higher costs, slower processing, and limited competition.

The Bank of Canada has previously explored digital money. In 2022, it partnered with the Massachusetts Institute of Technology to study a potential central bank digital currency. But by September 2024, it chose to shift focus, opting instead to develop a real-time payment system that allows instant transfers.

Despite this shift, Morrow said Canada still trails other countries in modernising its payments system. Progress has been slow in adopting new technology, encouraging competition, and providing Canadians with faster, more affordable services. He emphasised that the current momentum should be used to drive innovation and build a more competitive payments ecosystem .