Bank of Canada: Without establishing a stablecoin regulatory framework, Canada’s financial system "will be eliminated".

The senior officials of the Central Bank of Canada have issued a stern warning, urging the country to swiftly establish a regulatory framework for stablecoins to modernize the payment system and avoid falling behind in the global fintech competition. Central Bank officials clearly stated that even though Canada is currently on the right track, it will face the risk of being surpassed by other countries if it does not take proactive action, injecting new urgency into the regulatory environment for Crypto Assets in North America.

Bank of Canada: Not regulating stablecoin will leave the country's financial system behind

Ron Moreau, Executive Director of Payments, Regulation and Supervision at the Bank of Canada, gave a compelling speech at the Chartered Professional Accountants meeting in Ottawa on September 18. He warned, “Even if you are on the right track, if you just sit there, you will be passed by.” This statement has been publicly released on the central bank's official website, attracting widespread attention in the financial sector.

Morot particularly calls on federal and provincial regulatory agencies to work together to establish a comprehensive policy framework for stablecoins. He emphasized, “Ultimately, for stablecoins to be regarded as money, they must be as safe and stable as your bank account balance.”

Global stablecoin regulatory competition

(Source: RWA XYZ)

Moro pointed out that governments around the world are actively taking measures to regulate stablecoins and other crypto assets to ensure that consumers can benefit from them while avoiding credit and liquidity risks: “In fact, many jurisdictions worldwide have already or are about to establish regulatory frameworks for crypto assets.”

At the time this comment was made, the Crypto Assets industry was experiencing what is referred to as “stablecoin summer,” especially after the passage of the GENIUS Act in the United States, which paved the way for the mass adoption of stablecoins. Currently, the stablecoin market is predominantly led by tokens pegged to the US dollar, which puts more pressure on countries like Canada to establish their own regulatory frameworks to remain competitive.

Canada's Central Bank Changes Strategy: From CBDC to Stablecoin Regulation

It is worth noting that the Central Bank of Canada recently made significant changes to its digital currency strategy. In 2022, the bank collaborated with the Massachusetts Institute of Technology (MIT) to develop Central Bank Digital Currency (CBDC). However, in September 2024, the Central Bank announced that it would abandon its CBDC plans in favor of other priorities, including the development of an instant payment system that allows users to receive funds instantly.

This decision is partly based on the Central Bank's survey results regarding the attitudes of the Canadian public:

· 42% of respondents hold a positive attitude towards CBDC

· 20% of respondents indicated that they “dislike” or even “hate” this idea.

CBDC has always been a controversial topic in the Crypto Assets community, with many participants believing that this technology is contrary to open and permissionless financial value. Critics are also concerned that these tokens could give rise to a surveillance state.

Experts analyze that the Canadian Central Bank's strategic shift from a CBDC to a stablecoin regulatory framework reflects a pragmatic response to market realities and an emphasis on maintaining the competitiveness of financial innovation.

Future Outlook for Canadian Stablecoin Regulation

Financial analysts point out that Canada's establishment of a stablecoin regulatory framework will bring multiple benefits:

· Provide a clear legal environment for financial technology innovation

· Protect consumers from the potential risks of unregulated stablecoins.

· Enhance Canada's competitiveness in the global digital financial sector.

· Create conditions for cooperation between traditional financial institutions and the Crypto Assets industry.

As countries around the world accelerate the establishment of cryptocurrency regulatory frameworks, this call from the Central Bank of Canada may mark a significant shift in the regulatory direction in North America and could have far-reaching implications for the entire Crypto Assets ecosystem.