Central Bank of Canada Advocates for Regulations as Stablecoins Become Widely Adopted
In the rapidly evolving world of digital finance, Canada finds itself in a unique position. The country currently lacks federal stablecoin regulation, relying instead on provincial securities frameworks and federal anti-money laundering provisions. This situation has sparked discussions among Canadian business leaders and financial experts, who are growing increasingly concerned about the country's competitiveness in the global digital economy.
According to a recent survey, almost 60% of Canadian business leaders believe that the lack of payment innovation will negatively impact the country's competitiveness. This concern was echoed by the Deputy Governor, who highlighted the cost disparity as a significant challenge, particularly for immigrant communities sending remittances overseas.
The call for change has been echoed by several key figures within the Canadian financial sector. Ron Morrow, the Bank of Canada's Executive Director of Payments, Supervision, and Oversight, has advocated for federal stablecoin regulation, citing the need for a stable and secure global entry system. In his view, stablecoins, which are pegged to a fiat currency like the U.S. dollar and generally trade close to the value of that currency, could potentially reduce cross-border payment fees in Canada to less than 1%.
Ron Morrow's sentiments were seconded by Manhar Garegrat, who emphasised the importance of a Canadian fiat-backed stablecoin being seamlessly integrated with domestic payment systems, having strong local utility, global interoperability, and regulatory clarity. Garegrat also argued that all sovereign nations will likely issue digital currencies, given the potential offered by neutral, trustless blockchains like Ethereum and Solana for real-time global trade.
However, not everyone is in favour of rushing into stablecoin regulation. Ron Morrow has expressed caution about the potential changes stablecoins could bring to Canada's payment infrastructure, emphasising the need for stability and safety before any large-scale adoption.
Musheer Ahmed, on the other hand, suggests that Canada could take a leaf from the HKMA and VARA playbook, using sandboxes and pilots to test the waters while regulations make their way through the legislative bodies. Ahmed also highlighted the potential risks of falling behind in the global race, with the U.S. gaining advantages under the GENIUS Act.
The high cost of international money transfers in Canada is another pressing issue. Jagdish Pandya, founder of Blockon Ventures, stated that stablecoins could bring down remittance fees to less than 1%, since only network fees are a primary cost. This could significantly improve the financial situation of immigrant communities in Canada.
In conclusion, the debate over stablecoin regulation in Canada is heating up, with concerns over competitiveness, remittance fees, and payment infrastructure at the forefront. As the world moves towards a more digital economy, the need for a robust and secure global entry system in Canada becomes increasingly apparent.
