On March 10, 2025, the Canadian Web3 Council (CW3) submitted its recommendation to the Department of Finance as part of the federal government’s pre-budget consultations for Budget 2025. As the global financial system undergoes rapid transformation, CW3 is urging the federal government to take decisive steps to position Canada as a leader in the digital economy. The submission outlines a set of policy recommendations aimed at supporting responsible innovation, enhancing economic competitiveness, and ensuring that Canada is not left behind as financial services continue to modernize.
CW3’s recommendations reflect the growing importance of digital assets, stablecoins, decentralized finance, and blockchain-based technologies. By establishing thoughtful regulation and modernizing Canada’s financial infrastructure, the government can unlock new economic opportunities while protecting consumers and reinforcing Canada’s financial sovereignty.
Establishing a Regulatory Framework for Stablecoins
CW3 recommends that the Government of Canada prioritize the recognition and regulation of fiat-backed stablecoins as digital payment systems. Stablecoins—digital assets pegged to national currencies—are emerging as efficient, low-cost alternatives to traditional payment systems. However, without a clear regulatory framework, Canadians are increasingly relying on foreign-issued stablecoins, reducing the prominence of the Canadian dollar in digital transactions.
A regulatory framework should ensure that Canadian dollar-backed stablecoins are fully redeemable, transparently backed by high-quality liquid reserves, and subject to licensing and oversight. This would foster trust in digital payments and strengthen Canada’s position in the global digital finance ecosystem.
Modernizing Consumer-Driven Banking
CW3 urges the government to expand Canada’s open banking framework to include digital assets. Doing so would allow individuals and businesses to securely share their digital asset transaction data with accredited third-party providers, enabling innovation and driving competition in financial services.
As other leading jurisdictions, such as the United Kingdom and Australia, move forward with open banking policies that empower consumers, Canada must ensure its regulatory framework does not limit financial innovation to traditional banking institutions. To ensure consumer protection, the framework should require third-party providers to adhere to strict data security and privacy standards to prevent fraud and misuse. A modernized, consumer-driven banking system that includes digital assets will give Canadians greater control over their financial data and unlock access to a broader range of services.
Ensuring Fair Banking Access for Web3 Businesses
Despite operating in full compliance with Canadian regulations, many Web3 businesses continue to face barriers in accessing essential banking services. CW3 recommends that the government adopt measures to ensure fair access to banking for all lawful businesses.
Current risk-based frameworks often misclassify regulated digital asset firms as high-risk by default. CW3 urges a reassessment of these guidelines and calls for transparency in how financial institutions make decisions around account closures or service denials. Ensuring equal access to banking will foster innovation, attract investment, and prevent Canadian companies from relocating to more supportive jurisdictions.
Allowing Digital Assets in Registered Investment Accounts
CW3 recommends that the government allow Canadians to hold specified digital assets, such as Bitcoin and Ethereum, directly in registered investment accounts, including RRSPs and TFSAs. While Canadians currently access crypto exposure through ETFs, direct ownership of digital assets in tax-advantaged accounts remains unavailable.
Providing investors with more choice in portfolio diversification—especially through regulated and well-defined channels—will ensure that Canadian savers are not disadvantaged compared to their international peers. Clear eligibility criteria and tax reporting standards can support a responsible, accessible path forward.
Extending Investor Protection to Crypto Assets
To promote investor confidence and strengthen financial protections, CW3 proposes that the Canadian Investor Protection Fund (CIPF) be expanded to include crypto assets held by registered investment dealers. This would modernize Canada’s investor protection framework and ensure that clients of regulated dealers are not left exposed in the event of insolvency.
CW3 further suggests that risk mitigation measures be implemented to ensure that investment dealers holding crypto assets comply with stringent custody standards to manage operational and jurisdictional risk, including requiring the cold storage of client assets in Canada with licensed, insured digital asset custodians to reduce exposure to loss or mismanagement.
Supporting Domestic Digital Asset Custody
The safeguarding of client assets is critical to investor protection. CW3 recommends that the federal government update its regulations to support the growth of cold storage digital asset custodians in Canada.
Currently, domestic providers face high capital requirements that may be disproportionate to their operational risk profiles. CW3 proposes regulatory adjustments to recognize operational resilience and cybersecurity standards as key indicators of readiness, while supporting domestic providers in meeting capital thresholds over time. A requirement to hold a minimum percentage of digital assets in Canada would also reduce jurisdictional risk and enhance investor protection.
Collaborating to Combat Illicit Activity
CW3 supports a coordinated effort between the government, regulators, and the Web3 industry to prevent illicit activity. Initiatives such as standardized best practices, new technologies to detect financial crime, and regulatory sandboxes can help foster trust and ensure compliance while enabling innovation.
Greater collaboration between regulators, financial institutions, and Web3 companies will enhance the security and resilience of Canada’s financial system. It also provides an opportunity for regulated Web3 firms to demonstrate strong compliance practices and contribute meaningfully to a safer and more transparent digital economy.
Establishing Clarity Through a Regulatory Taxonomy
Finally, CW3 recommends that the Government of Canada, in coordination with the Heads of Regulatory Agencies, prioritize the development of a national regulatory taxonomy for digital assets and cryptocurrencies. Defining clear categories for digital assets will help determine which regulatory frameworks apply and reduce uncertainty for market participants.
This work should be coordinated across federal and provincial regulators and aligned with international best practices, such as the EU’s Markets in Crypto-Assets (MiCA) framework. Regulatory clarity is essential to attracting investment, increasing productivity, and ensuring responsible innovation.
Conclusion
Canada has a historic opportunity to lead in the digital economy by embracing Web3 technologies through smart, forward-thinking policy. CW3’s recommendations provide a roadmap to modernize Canada’s financial system, unlock innovation, and protect Canadian consumers and businesses. With the right regulatory approach, Canada can ensure its financial system evolves in a way that benefits consumers, businesses, and the broader economy.
