Canada has released a list of proposed regulations that will govern how stablecoins are used—bringing the country’s Stablecoin Act (SCA) one step closer to coming into force.
The news: The proposed regulations were published on Friday in the Canada Gazette, an online portal maintained by the Canadian government that publishes public notices, official appointments, and proposed regulations prior to them becoming law. The regulations are subject to a 60-day consultation period.
From the source: “This guidance should give the industry more certainty and stronger protections for payment use cases. At the same time, most issuers and platforms will still need to navigate both regimes with the Bank of Canada and the Canadian Securities Commission. This will create a burden to manage extra compliance work to be compliant with the current framework,” said Koleya Karringten, executive director of the Canadian Bitcoin Consortium, adding that joint guidance from both oversight bodies would benefit SCA-approved issuers looking for clarity on trading and listing requirements and exemption status for provincially regulated issuers.
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The context: Stablecoins are digital assets designed to hold steady value, and are usually one-to-one pegged to fiat currencies like the US or Canadian dollar. Canada’s SCA dates back to March when legislation to create the act first received royal assent. The regulatory framework is designed to govern stablecoins in Canada that have interprovincial or international applications and sets federal oversight of the digital currencies through the Bank of Canada.
Proposed regulations include requirements around reserve assets for issuers and where those assets can be held, as well as prohibitions on marketing stablecoins as legal tender, bank deposits, or publicly insured products, and from paying interest to holders.
The SCA will also enable the finance minister to assess stablecoin applicants for national security risks, and will establish enforcement powers for the Bank of Canada. The proposed regulations note that as digital assets are “rapidly evolving,” the act is designed to allow the Bank’s governor to make further regulations. A full description of the proposals can be found here.
Final thought: The global stablecoin supply is currently valued at more than $380 billion, and according to Visa, there has been more than $14 trillion in stablecoin transaction volume over the last year. But most of those stablecoins globally are currently pegged to the US dollar; Canada’s first CAD-backed stablecoin launched earlier this year.
Feature image courtesy Wikimedia Commons under license CC BY-SA 3.0.
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