Canada’s 2025 federal budget, unveiled on 4 November, places fiat-backed stablecoins at the centre of its plan to modernise the national payments system.

The initiative signals a clear policy shift from research on central bank digital currencies toward regulating private digital assets within the country’s financial framework.

By introducing detailed rules around issuance, redemption and oversight, the government aims to make stablecoins secure, transparent and suitable for daily transactions while safeguarding financial stability.

The Bank of Canada will oversee the framework and integrate stablecoins into the Retail Payment Activities Act.

A regulated path for fiat-backed stablecoins

Under the new framework, issuers will be required to maintain adequate reserves, establish risk management systems and comply with data protection standards.

The legislation also includes national security provisions to uphold the integrity of the financial system and protect consumers.

The Bank of Canada will allocate CA$10 million over two years starting in 2026 to administer the framework, with annual operating costs of CA$5 million to be recovered from regulated issuers.

Amendments to the Retail Payment Activities Act (RPAA) will bring payment service providers handling stablecoin transactions under formal supervision.

Introduced in 2021, the RPAA already regulates both domestic and foreign payment firms in Canada. Its expansion to cover stablecoin use reflects the government’s intention to fold digital currencies into the existing financial oversight structure.

From central bank currency to private innovation

The move marks a turning point in Canada’s digital currency policy. In September 2024, the central bank decided against launching a retail central bank digital currency and shifted its focus to analysing global payment trends.

That decision created a gap that the new stablecoin legislation now addresses.

Officials have acknowledged that reform in Canada has been slower than in other major economies.

The Bank of Canada’s Executive Director of Payments, Ron Morrow, previously cautioned that Canada could fall behind the United Kingdom, Australia and the European Union, all of which already have digital asset frameworks.

By regulating rather than issuing digital assets, Canada is adopting a hybrid model that allows private innovation while maintaining government supervision. This approach is intended to encourage payment innovation without compromising oversight.

Building a modern and secure payment system

The stablecoin framework forms part of a broader payments modernisation plan.

Alongside it, the government plans to advance consumer-driven banking, open data mobility and the Real-Time Rail system, which is expected to enable instant fund transfers by 2026.

For consumers, the reforms promise faster and more reliable transactions and may lower the cost of cross-border payments. For issuers and payment providers, the challenge lies in meeting new compliance requirements while remaining competitive.

The legislation’s emphasis on privacy and national security also signals the government’s intention to build public trust in digital finance as it becomes a mainstream part of the economy.

Toward a digitally integrated financial system

The new stablecoin rules complement existing crypto regulations in Canada, which already require strict compliance from exchanges and trading platforms.

Several major international firms have withdrawn from the market in recent years, citing complex regulatory demands.

In addition, the Crypto-Asset Reporting Framework, coming into effect in 2026, will compel crypto service providers to report client and transaction data to tax authorities.

Together, these developments reflect a strategic shift in how Canada views digital finance. By replacing experimental central bank projects with clear regulation, the government is laying the foundation for a secure and inclusive digital economy.

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Canada pivots to stablecoins as cornerstone of its digital payments reform

Source: https://coinjournal.net/news/canada-pivots-to-stablecoins-as-cornerstone-of-its-digital-payments-reform/

Canada’s Financial Transactions and Reports Analysis Centre (Fintrac) has imposed the largest penalty on record against Xeltox Enterprises Ltd., operating as Cryptomus, after the firm allegedly failed to comply with anti-money-laundering (AML) regulations.

The Vancouver-based cryptocurrency services provider was fined C$177 million ($126 million) for multiple violations involving suspicious transactions, according to a statement released Wednesday.

Widespread reporting failures

Fintrac’s investigation determined that Cryptomus failed to report thousands of transactions in a single month, raising serious compliance concerns.

The agency noted that the company neglected to submit reports on more than 1,000 transactions in July 2024 that raised reasonable suspicion of connections to money laundering, including proceeds linked to child sexual abuse material, fraud, ransomware payments, and sanctions evasion.

Additionally, the regulator found that Cryptomus failed to report over 1,500 transactions in which clients transferred virtual currency of C$10,000 or more in a single transaction during the same period.

These reporting lapses triggered Fintrac to take what it described as “unprecedented enforcement action,” reflecting the severity of the potential financial crime risks involved.

Fintrac CEO Sarah Paquet emphasized that the scale and nature of the violations compelled the agency to act decisively, citing the firm’s repeated failures to meet AML obligations.

Prior regulatory scrutiny on Cryptomus

Cryptomus, formerly known as Certa Payments Ltd., provides a range of cryptocurrency services including trading, payments, wallets, and a peer-to-peer exchange.

The firm has previously drawn regulatory attention in Canada.

In May, the BC Securities Commission accused Cryptomus of potentially operating as an unrecognized exchange.

The provincial regulator issued a temporary order suspending the firm from trading securities or derivatives until June, underscoring ongoing concerns about its compliance with financial regulations.

Cryptomus’s operations in Canada and its previous enforcement history highlight the challenges regulators face in overseeing cryptocurrency platforms, particularly when transactions may intersect with illicit activity.

The latest fine represents a major escalation in enforcement, signaling the Canadian authorities’ intent to hold crypto firms accountable for strict adherence to AML rules.

Implications for the cryptocurrency sector

The record-setting penalty against Xeltox and Cryptomus sends a clear signal to cryptocurrency businesses operating in Canada: compliance with anti-money-laundering regulations is mandatory, and failures carry substantial financial and operational risks.

The firm’s alleged lapses illustrate the risks posed by platforms that handle high volumes of unmonitored digital transactions.

Fintrac’s decision underscores that cryptocurrency platforms must treat regulatory compliance as a central operational priority, not an afterthought, to avoid similar penalties in the future.

The C$177 million fine represents the largest enforcement action in Fintrac’s history and sets a new benchmark for regulatory consequences in Canada’s growing digital asset industry.

The post Crypto firm Xeltox fined record C$177M by Canadian AML regulator appeared first on CoinJournal.

Crypto firm Xeltox fined record C$177M by Canadian AML regulator

Source: https://coinjournal.net/news/crypto-firm-xeltox-fined-record-c177m-by-canadian-aml-regulator/