The global cryptocurrency landscape is shifting rapidly, and while the United States moves decisively toward integrating digital assets into its financial framework, Canada faces mounting pressure to keep pace. At the heart of this push is a growing call from industry leaders to recognize and regulate stablecoins—a critical bridge between traditional finance and the decentralized future.
Lucas Matheson, head of Coinbase’s Canadian operations, has been actively engaging with policymakers to advocate for modernized crypto regulations. His message is clear: Canada must act now to avoid being left behind in the global digital economy.
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Why Stablecoins Matter
Stablecoins are a unique category of cryptocurrency designed to minimize volatility by pegging their value to stable assets—typically the U.S. dollar or short-term government securities. Unlike Bitcoin or Ethereum, which can swing wildly in value, stablecoins offer predictability, making them ideal for everyday transactions, cross-border payments, and digital commerce.
By maintaining reserves to back each coin issued, stablecoins aim to combine the efficiency of blockchain with the reliability of fiat currency. This balance makes them a powerful tool for financial innovation—especially as businesses and consumers seek faster, cheaper alternatives to traditional banking systems.
However, without clear regulation, questions remain about whether issuers like Tether and Circle actually hold sufficient reserves. Transparency gaps have fueled skepticism among regulators and financial institutions alike.
The U.S. Sets a Precedent
The United States is moving swiftly to establish a regulatory foundation for stablecoins through a proposed federal bill. The legislation would require:
- Full backing of stablecoins by U.S. dollars or short-term treasuries
- Regular public financial reporting
- Prohibition on stablecoin issuers offering interest on holdings
This framework aims to build trust while mitigating systemic risks. According to Matheson, the U.S. approach sends a strong signal: “What the U.S. has done is establish some credibility at the most senior levels of government, and we hope that inspires our elected officials to do the same.”
Canada, by contrast, still classifies stablecoins as securities—meaning they’re treated more like investment products than payment tools. This classification creates barriers for widespread adoption and discourages innovation within the fintech ecosystem.
“We’re keen for Canada to also embrace some frameworks and definitions around stablecoins,” Matheson emphasized. “There’s a real opportunity here for leadership.”
Mainstream Adoption on the Horizon
Stablecoins are no longer niche experiments—they’re becoming mainstream financial instruments. Tether (USDT), the largest dollar-backed stablecoin, has grown from under $10 billion in market cap in 2020 to nearly $160 billion today. In 2024 alone, Tether reported $13 billion in profit from interest earned on its treasury holdings.
Industry forecasts suggest the total stablecoin market could reach $2 trillion by 2028, driven by increasing institutional interest and regulatory clarity—especially in the U.S.
One major catalyst for consumer adoption is Shopify’s recent partnership with Coinbase, enabling merchants to accept stablecoin payments directly. For businesses, this means lower transaction fees compared to credit card processors. For consumers, the benefits are still emerging—but could include loyalty rewards, token-gated shopping experiences, and digital ownership of purchased goods.
Matheson envisions a future where:
“You go to a Shopify merchant, that merchant offers a token-gated experience where maybe you need an NFT… hold that NFT as part of a loyalty program… then shop with a merchant and receive digital twins of those products as a warranty, receipt, and collectible.”
This fusion of e-commerce, blockchain, and digital identity represents the next frontier of online retail.
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Risks and Regulatory Challenges
Despite their potential, stablecoins come with significant risks—both criminal and systemic.
Illicit Use Remains High
According to Chainalysis, $51 billion worth of stablecoins flowed into illicit addresses in 2024, accounting for 63% of all illegal crypto activity. While blockchain transactions are transparent by design, criminals use mixing services and privacy tools to obscure fund movements.
Proponents argue that regulated stablecoins can actually enhance traceability and reduce fraud—but only if implemented alongside robust oversight.
Systemic Financial Risks Loom
The Bank for International Settlements (BIS) recently warned that unchecked growth in stablecoins could threaten global financial stability. In a stark analogy, the BIS compared today’s landscape to 19th-century U.S. banking, where private banks issued their own paper money—leading to frequent bank runs when confidence collapsed.
“Society has a choice,” the report stated. “The monetary system can transform into a next-generation system built on tried and tested foundations … or society can relearn the historical lessons about the limitations of unsound money.”
Additional concerns include:
- Stablecoin issuers acting like banks by offering yield
- Risk of runs if reserves are insufficient
- Lack of deposit insurance or central bank backing
Notably, the proposed U.S. law bans interest payments on stablecoins due to these risks. Yet Matheson believes Canada should reconsider its own ban: “Providing yield on stablecoins is not currently permitted in Canada—but it’s something our industry is actively advocating for.”
Core Keywords
- Stablecoins
- Cryptocurrency regulation
- Blockchain technology
- Digital payments
- Financial innovation
- Crypto adoption
- Decentralized finance (DeFi)
- Cross-border transactions
Frequently Asked Questions (FAQ)
What are stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to assets like the U.S. dollar or government bonds. They combine blockchain efficiency with price stability, making them suitable for payments and savings.
Why aren't stablecoins widely accepted in Canada?
Canada lacks a clear regulatory framework for stablecoins. They're currently classified as securities rather than payment methods, limiting their use in commerce and discouraging innovation.
Are stablecoins safe?
When properly backed and transparently managed, stablecoins can be secure. However, risks include insufficient reserves, lack of oversight, and potential use in illicit activities—highlighting the need for strong regulation.
How do stablecoins differ from regular cryptocurrencies?
Unlike volatile assets like Bitcoin, stablecoins maintain a steady value. This makes them better suited for daily transactions rather than speculative investing.
Can I earn interest on stablecoins?
In some jurisdictions, yes—many platforms offer yield through lending or DeFi protocols. However, Canada currently prohibits this practice, though industry leaders are pushing for change.
What role do stablecoins play in cross-border payments?
Stablecoins enable near-instant, low-cost international transfers without intermediaries like banks or payment processors—making them ideal for remittances and global trade.
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The Path Forward for Canada
As the world embraces digital finance, Canada stands at a crossroads. The crypto industry isn’t asking for deregulation—it’s calling for clarity, structure, and forward-thinking policy that balances innovation with protection.
Regulatory certainty won’t eliminate bad actors overnight, but it will empower legitimate businesses, protect consumers, and position Canada as a leader in financial technology.
“Regulatory clarity will trump all other temporary behaviour or experimentation that we’re seeing in the market,” Matheson concluded.
The question isn’t whether stablecoins will shape the future of money—it’s whether Canada will have a seat at the table when that future is built.