Canada is facing mounting economic and strategic pressures. Productivity has declined, investment remains weak, and global trade dynamics are evolving. At the same time, investing in digital infrastructure is becoming increasingly central to economic growth and driving productivity. Web3 technologies, including blockchain, tokenization, and decentralized networks, offer a path to improving capital efficiency, modernizing outdated financial systems, and diversifying our economy.
To help inform policy and support Canada’s long-term competitiveness, the Canadian Web3 Council has published The Future of Web3 in Canada: A Blueprint for Responsible Innovation. The white paper outlines how Web3 technologies can contribute to economic growth, and it proposes a set of practical policy recommendations to guide Canada’s path forward.
This post summarizes the paper’s core findings and recommendations.
Modernizing a Fragmented Financial System
Canada’s current financial infrastructure, while reliable, is aging. Legacy systems like the ACSS batch processor and the delayed Real-Time Rail project introduce frictions that slow transactions, increase costs, and constrain innovation across the financial sector..
Web3 technologies enable functions such as atomic settlement, programmable payments, and the use of distributed ledgers to reduce inefficiencies and lower transaction costs. Their integration with core financial market infrastructure offers the potential to unlock trapped capital, improve transparency, and reduce counterparty risks. Payment systems play a foundational role in commerce and trade; modernizing them will be essential for long-term competitiveness.
Stablecoins and Economic Sovereignty
The widespread use of USD-denominated stablecoins in Canada presents challenges to monetary sovereignty and domestic interoperability. A Canadian-dollar stablecoin, supported by a dedicated federal framework for non-bank issuers, may serve as digital money equivalent and a secure and interoperable domestic payment rail.
Stablecoins should be recognized as digital payment systems, with a federal licensing framework for non-bank issuers that ensures cybersecurity, operational resilience, interoperability, and financial stability. Recognizing their role in modern payment infrastructure will allow for more effective oversight while supporting innovation in domestic payment systems.
Addressing Structural Barriers for Web3 Builders
Web3 businesses in Canada face persistent barriers including limited access to financial services, and capital requirements that do not reflect their operational models. These frictions discourage innovation and investment and make it difficult for Web3 businesses to compete.
A framework that emphasizes operational resilience and interoperability, rather than focusing solely on capital buffers, could support the development of secure, compliant infrastructure providers such as digital asset custodians. Policymakers could further enable innovation by legally recognizing distributed ledgers as valid registries for applications including land titles, digital identity, and health records.
Responding to Public Demand for Crypto Access
Canadians are increasingly interested in using digital assets for payments and long-term savings. Surveys show support for accessing stablecoins and crypto within tax-advantaged accounts. Expanding Canada’s Consumer-Driven Banking initiative to include digital assets, along with extending CIPF protections to digital holdings, would bring frameworks in line with evolving consumer expectations.
Clarifying Market Structure for Digital Assets
Canada lacks a consistent regulatory taxonomy for digital assets, and the regulation of both payment stablecoins and crypto asset lending are out of step with other jurisdictions. This has led to overlapping jurisdictions and regulatory challenges that increase operational complexity. A function-based framework, similar to the EU’s Markets in Crypto-Assets Regulation (MiCA), could help clarify the treatment of payment instruments, investment tokens, and network assets.
Clear treatment of decentralized autonomous organizations (DAOs) and community-owned networks under Canadian law would also support more equitable governance models while reducing regulatory uncertainty.
Supporting Innovation Beyond Financial Markets
Web3 technology is not limited to financial markets. Applications such as decentralized identity, data ownership platforms, and community-owned networks offer alternatives to centralized systems dominated by large technology platforms. To support innovation in these areas, policymakers will need to update economic measurement tools and collaborate with industry to better understand the scope of activity on permissionless digital networks.
Policy Recommendations
The Canadian Web3 Council proposes nine specific actions to support a more competitive, inclusive, and secure Web3 ecosystem:
Recommendation 1: That the Government of Canada prioritize the recognition and regulation of stablecoins as digital payment systems.
Recommendation 2: That the Government of Canada expand Consumer-Driven Banking to include digital assets.
Recommendation 3: That the Government of Canada adopt measures for fair access to banking for Web3 businesses.
Recommendation 4: That the Government of Canada allow specified digital assets in registered investment accounts.
Recommendation 5: That the Government of Canada, in consultation with the provinces and stakeholders, adopt measures to extend Canadian Investor Protection Fund coverage to digital assets held by investment dealers.
Recommendation 6: That the Government of Canada prioritize the adoption of regulatory changes to support the growth of cold storage digital asset custodial services in Canada for Canadian cryptocurrency firms.
Recommendation 7: That the Government of Canada initiate a joint effort to counter illicit activities through our institutions.
Recommendation 8: That the Government of Canada, in coordination with the Heads of Regulatory Agencies and other Canadian regulators, develop a regulatory taxonomy that draws clear boundaries for regulating the different types of digital assets and a clear market structure, and clarifying the application of various Canadian laws to Decentralized Autonomous Organizations, digital assets and to decentralized finance.
Recommendation 9: That the Government of Canada collaborate with industry to assess and properly measure economic activity and investment in a digitised economy, enhance monitoring of financial stability risks, and provide incentives to support the development of non-financial Web3 use cases such as decentralized social media, AI, and digital identity.
Conclusion
Canada’s digital economy is evolving, and with thoughtful collaboration between industry and policymakers, it is possible to modernize financial infrastructure and regulatory frameworks in a way that preserves stability and promotes responsible innovation. The recommendations outlined here, and the decisions made now, will shape Canada’s competitiveness and economic resilience in the years ahead.
To explore these issues in more detail, read the full white paper: The Future of Web3 in Canada: A Blueprint for Responsible Innovation
