On May 27, 2025, the Canadian Web3 Council submitted its recommendations to the federal government as part of the pre-budget consultations ahead of Budget 2026. The submission makes a direct case: Canada is losing ground in digital payments, and stablecoins are a big part of why.
Right now, 98% of stablecoins in circulation are denominated in U.S. dollars. That is not a coincidence. It reflects deliberate regulatory choices made by peer jurisdictions, including the U.S., the U.K., and much of Europe, that Canada has not matched. Every cross-border transaction settled in a USD stablecoin reinforces U.S. monetary dominance and drives demand for U.S. Treasuries. Canada gets none of that.
Why Stablecoin Regulation Matters
Businesses are already using stablecoins. Transaction volume hit an estimated $33 trillion in 2025. These are not speculative assets anymore. They are payment instruments, settlement tools, and increasingly, infrastructure. The question is not whether stablecoins will be part of global commerce. They already are. The question is whether Canadian businesses will be able to participate on competitive terms.
That requires CAD-denominated stablecoins, and CAD-denominated stablecoins require a regulatory framework that does not currently exist. CW3’s submission is an attempt to give Ottawa a starting point. The Council is not asking for special treatment. It is asking Canada to do what its trading partners are already doing, before the window closes.
CW3’s Four Recommendations
1. Adopt a Coherent Regulatory Taxonomy for Stablecoins
CW3 recommends establishing a consistent regulatory classification for qualifying stablecoins across all relevant laws and regulatory frameworks. The current ambiguity creates operational complexity, tax uncertainty, and barriers to innovation.
A clearer framework would simplify tax reporting and compliance, improve regulatory coordination, and support both wholesale and retail payment innovation. It would also strengthen Canadian monetary sovereignty by encouraging demand for Canadian government bonds as backing for CAD stablecoins. The submission calls for greater federal-provincial coordination and a stronger Bank of Canada role in overseeing stablecoin arrangements.
2. Narrowing Restrictions on Stablecoin Rewards and Yield
CW3 supports distinguishing stablecoins from investment products but warns that Canada’s approach risks making Canadian stablecoins less competitive internationally. The submission recommends narrowing the prohibition on interest and yield under Section 32 of the Stablecoin Act to allow common payment-network incentives like cash-back rewards, loyalty points, and usage incentives.
This would help Canadian stablecoin providers compete with foreign payment networks, encourage adoption of CAD-denominated stablecoins, and reduce incentives for Canadians to use USD stablecoins. Clarifying third-party decentralized finance or platform-based yield opportunities as exempt from issuer prohibitions is also recommended.
3. Lay Out Clear Custody Requirements
CW3’s third recommendation focuses on custody and reserve asset protection. The Council recommends that reserve assets, cash holdings, and private keys associated with Canadian-issued stablecoins be held within Canada through qualified custodians meeting clear regulatory standards.
A strong domestic custody ecosystem is crucial for protecting consumers, reducing concentration risk, supporting Canadian infrastructure providers, and building international trust in Canadian stablecoins. Clear rules from the outset would accelerate product development and reduce uncertainty for market participants.
4. Build International Reciprocity and Equivalency Frameworks
CW3 recommends establishing mutual reciprocity arrangements and equivalency standards with major global jurisdictions. This would allow Canadian stablecoin issuers to access international markets while ensuring foreign stablecoin issuers operating in Canada meet Canadian standards around reserves, redemption, and supervision.
International alignment is essential for integrating CAD stablecoins into global payment systems, supporting trade diversification, expanding international demand for Canadian-dollar digital assets, and ensuring Canadian firms can compete globally.
Conclusion
The global regulatory picture is shifting fast. CW3’s submission is Canada’s chance to get ahead of it rather than catch up to it. The Council puts forward four recommendations: a coherent regulatory taxonomy, narrowed restrictions on rewards and yield, clear custody requirements, and international reciprocity frameworks.
CW3 will stay at the table as the Stablecoin Act develops. The stakes are real. Done well, a Canadian stablecoin framework strengthens the economy, modernizes how money moves, and keeps Canada from ceding ground in a financial system that is already being rebuilt around it.
