On December 3, 2024, Circle Internet Financial, LLC (Circle) became the first stablecoin issuer to file an undertaking (the Circle Undertaking) with the Canadian Securities Administrators (CSA). Circle is the issuer of USDC Coin (USDC), the world’s second-largest US-dollar-backed stablecoin by market capitalization.
The Circle Undertaking enables crypto asset trading platforms registered with the CSA (Registered CTPs) to continue offering USDC in 2025. Additionally, Registered CTPs selling USDC to Canadian clients will no longer face the retail purchase limit of C$30,000 per year, which previously applied to most crypto assets except Bitcoin, Ether, Litecoin, and Bitcoin Cash.
Key Developments in Stablecoin Regulation
1. CSA’s Interim Framework for Stablecoins
The CSA announced plans to regulate Value-Referenced Crypto Assets (VRCAs) in October 2023 but delayed implementation twice due to industry concerns about alignment with global standards. Notably:
- Unlike securities, USDC holders do not expect profits—its value is pegged to 1 USD.
- Circle’s terms of service explicitly state that holders earn no interest from reserve assets.
👉 Explore how stablecoins are reshaping digital payments
2. Industry Response and Regulatory Gaps
Circle’s filing emphasized that USDC is not classified as a security in the U.S., EU, or other analyzed jurisdictions, where it’s considered a virtual currency, e-money, or commodity. However, critical questions remain unresolved:
- Payment Service Providers (PSPs) will soon face prudential regulation under Canada’s Retail Payments Activities Act (RPAA), but stablecoin issuers will not.
- The RPAA excludes cryptocurrency services, despite industry advocacy for inclusion.
The Future of Stablecoin Regulation in Canada
Challenges and Opportunities
- Prudential Oversight: Stablecoin reserves lack safeguards akin to PSPs, which must protect end-user funds under Bank of Canada supervision.
- Global Alignment: Jurisdictions like the EU regulate stablecoins under e-money frameworks, while Canada’s approach remains disclosure-based.
Recommendations for Policymakers
- Collaborate with Industry: Develop a long-term framework fostering innovation while ensuring consumer protection.
- Level the Playing Field: Ensure equal access for Canadian and foreign stablecoin issuers.
- Explore RPAA Expansion: Consider bringing stablecoins under prudential regulation to enhance trust.
👉 Learn more about the evolving crypto regulatory landscape
FAQ Section
Q: How does the Circle Undertaking benefit Canadian crypto users?
A: It allows Registered CTPs to offer USDC without the C$30,000 annual purchase limit, improving accessibility.
Q: Why aren’t stablecoin issuers regulated like PSPs?
A: Current laws exclude crypto-related services from the RPAA, creating a regulatory gap.
Q: What’s next for stablecoin regulation in Canada?
A: Stakeholders urge the CSA and federal regulators to harmonize rules with global standards and address prudential concerns.
This analysis highlights the need for Canada to balance innovation with robust oversight as stablecoins redefine digital payments.
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