Stablecoins are becoming a core part of how money moves online. They are digital assets designed to maintain a stable price and are increasingly used to transfer value over blockchain networks in real time.
Originally developed as tools within crypto markets, stablecoins are now being used for payments, settlement, and everyday commercial activity. As their role has expanded beyond trading into functions that resemble digital cash and payment infrastructure, they have attracted growing attention from financial institutions, businesses, and regulators.
This post provides a practical Stablecoins 101 overview. It explains what stablecoins are, how they work, where they are already being used at scale, and why a clear Canadian framework matters for consumers, businesses, and Canada’s financial system.
What are stablecoins?
At their core, stablecoins are digital tokens designed to track the price of an underlying reference asset, most commonly a fiat currency such as the Canadian or U.S. dollar. Unlike volatile cryptocurrencies, payment-focused stablecoins are intended to function as digital money: a medium of exchange, a unit of account, and a store of value over short periods of time.
Most payment-focused stablecoins are fully backed by high-quality, liquid assets such as cash or short-term government securities. Holders can redeem their stablecoins at par, meaning one stablecoin can be exchanged for one unit of the underlying currency.
It is important to distinguish payment stablecoins from other crypto assets that may reference a value but behave more like investments. Canada’s proposed Stablecoin Act does exactly this by focusing on no-yield, fiat-backed stablecoins that are designed to be used for payments, not speculation.
How do stablecoins work?
At a high level, stablecoins combine familiar monetary concepts with modern digital infrastructure.
An issuer creates stablecoins when an authorized counterparty deposits Canadian dollars (or another reference currency). Those funds are held in reserve and invested only in permitted, low-risk assets. For every dollar held in reserve, one stablecoin is issued. When a holder redeems their stablecoins, the tokens are destroyed and the underlying fiat currency is returned.
Stablecoins move on blockchain networks rather than through traditional banking rails. This allows them to be transferred directly between users, 24 hours a day, seven days a week, without relying on correspondent banks or delayed settlement windows. Once a transaction is confirmed, it is final.
From a user perspective, a stablecoin can be held in a digital wallet, sent to another person or business, or used to pay for goods and services. From a systems perspective, stablecoins function as programmable digital assets, enabling automated payments, conditional logic, and direct integration with software.
Use cases and scale
Stablecoins are no longer experimental or niche. They are already operating at a meaningful scale.
Global circulating supply now exceeds $300B according to DefiLlama, supported by reserve portfolios holding over $200B in cash and short-dated U.S. Treasuries to maintain 1:1 redemption. On public blockchains, stablecoins moved approximately $33T in transaction volume in 2025, led by USDC ($18.3T) and USDT ($13.3T), according to reporting from Bloomberg. This activity reflects growing demand for fast, always-on digital dollars that can settle globally, without the constraints of traditional banking hours or correspondent networks.
That demand is most visible in cross-border payments, where existing systems remain slow, costly, and fragmented. Transfers that can take days and involve multiple intermediaries through the banking system can often settle in minutes using stablecoins, at a fraction of the cost.
Beyond payments, businesses are using stablecoins for treasury management, supplier payments, and international commerce. Payment providers and technology platforms are integrating stablecoins to support continuous settlement, reduce reliance on card networks, and serve global customers without building country-by-country banking relationships.
Stablecoins also enable programmable payments. Funds can be released automatically when contractual conditions are met, split among multiple recipients, or embedded directly into digital marketplaces and software platforms.
Why stablecoins matter for Canada
For Canadians, stablecoins are not intended to replace the existing financial system. Canada already has efficient domestic payment tools, and the Real-Time Rail will further improve local transfers. The value of stablecoins lies in what current systems struggle to provide: seamless cross-border payments, continuous availability, and open, programmable infrastructure.
Without a viable Canadian-dollar stablecoin, Canadian businesses and consumers are increasingly relying on U.S.-dollar stablecoins for these use cases. That trend carries real implications. It introduces currency risk, shifts activity onto foreign-denominated instruments, and reduces Canada’s influence over emerging digital payment infrastructure.
A clear framework for CAD-backed stablecoins would help address this gap. It would allow Canadian innovators to build compliant payment products, give businesses more efficient tools for global commerce, and ensure that digital Canadian-dollar instruments remain relevant as financial activity moves on-chain.
There are also broader policy considerations. Payment systems are critical infrastructure. As stablecoins become more widely used, decisions about who issues them, how they are regulated, and where oversight sits will shape Canada’s financial resilience and competitiveness. What matters is not whether foreign issuers participate, but how stablecoins are regulated and integrated into Canada’s financial system. Clear domestic rules ensure that Canadian policy objectives, oversight, and consumer protections apply regardless of where an issuer is based, while allowing Canada to participate fully in global payment networks.
Canada’s approach to regulation
Canada has taken an important step with the introduction of the Stablecoin Act. The proposed framework establishes federal oversight for no-yield, fiat-backed stablecoins, administered by the Bank of Canada. It clarifies that compliant stablecoin issuance is not securities dealing under federal law, sets baseline requirements for reserves and redemption, and integrates stablecoins into the broader payments regulatory framework.
This approach reflects a growing international consensus: payment stablecoins should be regulated as payment instruments, not as investment products. Clear rules reduce uncertainty for issuers and users, support consumer protection, and create the conditions for responsible innovation.
The work now shifts to implementation. Detailed regulations will define reserve standards, govern redemption in practice, enforce operational resilience, and align federal oversight with provincial regimes. Getting these details right will be critical to avoid regulatory overlap and ensure Canada remains competitive with jurisdictions such as the United States and the European Union.
Looking ahead
Stablecoins are best understood as a new layer of financial infrastructure. Like the early internet, their value lies less in any single application and more in what becomes possible when money can move as easily as data.
For Canada, the choice is not whether stablecoins will exist, but how they will be integrated. A clear, coordinated framework can support domestic innovation, protect consumers, and strengthen the role of the Canadian dollar in a digital economy. Delay or fragmentation risks leaving Canada dependent on foreign systems that were not designed with Canadian policy objectives in mind.
The Canadian Web3 Council remains focused on supporting a stablecoin framework that balances innovation, competition, and financial stability. With thoughtful implementation, stablecoins can complement Canada’s existing payment systems and help modernize the movement of value in an increasingly digital world.
