The United States’ newly passed stablecoin legislation could usher in a new era of digital finance, influencing global economies and putting pressure on Canada to accelerate its own crypto regulations.
Washington’s Bold Crypto Step Signals a New Era in Global Finance
The United States has passed landmark legislation to regulate stablecoins—digital assets pegged to traditional currencies—signalling the government’s most decisive move yet into the cryptocurrency sector. The new law, approved by the U.S. House of Representatives, provides financial institutions with the authority to issue stablecoins under a transparent legal framework, while establishing crucial protections for consumers and platforms.
Dubbed the Guiding and Establishing National Innovation for U.S. Stablecoins Act—known as the GENIUS Act—the law marks a major turning point for the digital asset space. It allows banks, fintech firms, and credit unions to apply for licenses to issue or distribute stablecoins, aiming to integrate them into the broader financial ecosystem.
“It’s a huge step forward because, generally speaking, for companies that were working in the U.S. industry, there wasn’t much clarity into what they could do or couldn’t do,” said Paul Pincente, vice-president of digital assets at Purpose Investments. “Ultimately, (the law) just sets the rules of engagement and (tells) companies what they’re able to do and how not to get into trouble.”
What Are Stablecoins and Why Do They Matter?
Unlike volatile cryptocurrencies such as Bitcoin and Ethereum, stablecoins are designed to retain a consistent value by being pegged to traditional assets like the U.S. dollar, euro, or gold. This stability makes them ideal for everyday transactions and decentralized financial applications.
“Stablecoins were invented as a way to keep value or wealth within the crypto ecosystem but be protected from the volatility swings of cryptocurrencies like bitcoin,” explained Pincente.
The most widely used stablecoin is Tether (USDT), which mirrors the U.S. dollar and serves as a primary transaction medium in the crypto market. Stablecoins rely on fully backed reserves such as fiat currency or U.S. Treasury bills, bridging the worlds of cryptocurrency and conventional finance.
Ripple Effects for the Global Economy
The GENIUS Act mandates that stablecoins be backed by safe, liquid assets, which could enhance demand for U.S. government debt while reducing borrowing costs. This structure may also increase trust among businesses and consumers, positioning stablecoins as a faster and cheaper alternative to traditional payments.
The regulation not only strengthens the U.S. dollar’s role in the digital economy but also sets the stage for global influence. As countries watch Washington’s lead, financial systems around the world—especially in Canada—are grappling with how to respond.
Canada on the Cusp of a Digital Finance Overhaul
In Canada, regulators are already feeling the pressure. While stablecoins—termed “value-referenced crypto assets”—are not banned, they are treated as securities or derivatives, placing them under stringent securities laws.
Since October 2023, platforms in Canada have been permitted to trade select fiat-backed stablecoins like USDC and USDT, provided they meet strict compliance requirements. These include full reserve backing, regular audits, and redemption guarantees. However, non-fiat-backed coins remain prohibited.
The regulatory burden has led major exchanges like Binance and ByBit to exit the Canadian market in 2023, citing an overly restrictive environment that limits decentralization.
Toward a Canadian Stablecoin Framework
Canadian authorities are now working on their own stablecoin legislation. The Office of the Superintendent of Financial Institutions, alongside the Department of Finance and the Bank of Canada, is shaping a national framework that includes licensing, reserve mandates, and consumer safeguards.
Pincente believes a Canadian dollar-pegged stablecoin could help modernize the financial landscape. “If you think more about the infrastructure around it, what are these assets, how they can facilitate easier transfers, how they can democratize access to financial services for people that typically are underserved, it’s the next step to take,” he said.
A Turning Point in Digital Finance
Canada’s Crossroads in a Digital Financial Future
With the U.S. taking the lead in stablecoin regulation, Canada and other global economies are being pushed toward reform. The GENIUS Act may well be the catalyst that drives countries to embrace the promise—and manage the risks—of digital finance. For now, all eyes are on how the North American financial landscape will evolve under this new digital regime.
