Canada Working on Regulations for Stablecoins, Bank Regulator Set to Implement Guardrails

By Robb M. Stewart

OTTAWA--Canada's financial industry is prepared to implement regulations for stablecoins that are being worked up by the federal government as Canada looks to keep up with countries including the U.S. bringing the digital tokens into the financial mainstream.

Work is underway on a regulated framework for the issuance and trade of stablecoins. When it is finalized it will be handed to the Office of the Superintendent of Financial Institutions, which will be charged with implementing it for the banks and other companies it regulators, Superintendent Peter Routledge said.

Routledge said he wouldn't publicly offer advice on who should be allowed to issue stablecoins, which he described as an important innovation, but said he was aware his colleagues at the Department of Finance have looked closely at regulations drafted in the U.S.

Stablecoins work as a bridge from regular money to cryptocurrency, allowing people to make payments or send funds overseas using the technology behind bitcoin, but without the volatility associated with digital currencies.

In the U.S., a Senate bill known as the Genius Act would require stablecoin issuers to underpin the value of their tokens with reserves of cash, short-term Treasurys and similarly safe assets. Larger issuers would be required to publish annual, audited financial statements. A companion bill is under consideration in the House of Representatives.

A bill would build a legal framework that could make stablecoins widely used for payments. The Wall Street Journal has reported that while banks have explored teaming up to offer a joint stablecoin, companies including Walmart and Amazon.com have also considered issuing stablecoins.

Routledge said OSFI already closely regulates Canada's banks, insurers and credit unions. When Ottawa produces a regulated framework for stablecoins, OSFI will explain how it can play a role in that regulation.

Representatives from Canada's Department of Finance didn't immediately respond to a request for comment.

Write to Robb M. Stewart at robb.stewart@wsj.com