The U.S. House of Representatives has passed a new bill to regulate

stablecoins

, allowing financial institutions to issue them and setting clear rules for consumers and distributors.

The law marks the U.S. government’s most significant step yet into the crypto space and has drawn global attention. With Washington leading the way, other countries — including Canada — are now facing pressure to accelerate their own plans for regulating

digital currencies

.

Here, the Financial Post breaks down what stablecoins are, how the new U.S. law could reshape the economy and what it all means for Canada’s evolving digital asset landscape.

What is a stablecoin?

Stablecoins are a type of cryptocurrency designed to maintain a stable value, typically by pegging their price to a traditional asset such as the

U.S. dollar

, euro or even gold. Unlike other cryptocurrencies, such as Bitcoin and Ethereum, whose prices can fluctuate dramatically day to day, stablecoins aim to offer price consistency, making them far more useful for everyday transactions and financial operations.

Most stablecoins achieve this stability by holding reserves — either in fiat currency, short-term government bonds like U.S. Treasuries or other low-risk assets — that match the value of the coins in circulation.

This structure allows them to act as a digital stand-in for cash within the crypto ecosystem. Because they are less volatile, stablecoins are used for payments and as the core liquidity layer for decentralized finance (DeFi) protocols, which facilitate transactions between non-bank entities.

While traditional cryptocurrencies are often viewed as speculative investments, stablecoins function more like digital dollars — a bridge between the fast-paced crypto market and the stability of the traditional financial system.

The most commonly used stablecoin is Tether, known as USDT. USDT is pegged against the U.S. dollar and serves as one of the primary mediums of transactions in the crypto market.

According to Paul Pincente, vice president of digital assets at Purpose Investments, “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.”

How will the new law affect business and the economy?

The Guiding and Establishing National Innovation for U.S. Stablecoins — also known as the Genius Act — allows banks, fintechs and credit unions to attain licenses permitting them to distribute or issue stablecoins. According to Pincente, the new regulations give much-needed clarity to companies while also providing the security that was missing from the cryptocurrency 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 or couldn’t do,” he said. “Ultimately, (the law) just sets the rules of engagement.”

The new legal framework could have significant ripple effects across the global economy. By requiring issuers to back their tokens with safe, liquid assets like U.S. dollars and Treasury bills, the law essentially encourages demand for government debt, potentially lowering borrowing costs and deepening liquidity in the treasury market.

At the same time, establishing clear rules for stablecoins could encourage broader use by consumers and businesses, who may view them as a faster and potentially lower-cost option compared to traditional payment methods.

It also positions the U.S. as a leader in global digital finance. The regulations reinforce the U.S. dollar’s dominance in a growing digital landscape.

However, the change brings new risks — connecting parts of the crypto world more closely to the U.S. financial system and forcing regulators to carefully balance new technology with overall economic stability.

What does it mean for Canada?

The introduction of stablecoin legislation in the U.S. may have implications for Canada’s financial sector and regulatory approach. As U.S. financial institutions begin issuing regulated stablecoins, Canadian consumers and businesses could gain indirect access to these digital assets through cross-border platforms.

This may increase demand for similar products in Canada, as well as regulatory clarity. It could also prompt Canadian policymakers to accelerate work on domestic rules for stablecoin issuance, oversight and consumer protection in order to maintain competitiveness and integrity in the financial system.

Additionally, increased global adoption of the U.S.-dollar-pegged stablecoins may further strengthen the role of the U.S. dollar in international digital payments, including in Canadian crypto markets.

That cross-border momentum is already being felt in Canada, where regulators are now weighing how to respond to the shift.

Does Canada currently allow stablecoins?

Under current Canadian regulation, stablecoins — referred to as value-referenced crypto assets (VRCAs) — are not explicitly banned, but their use is more restrictive compared to jurisdictions with dedicated frameworks.

The Canadian Securities Administrators (CSA) classifies many stablecoins (especially fiat-backed types) as securities or derivatives, meaning they fall under securities law. As a result, trading such stablecoins is only permitted through registered crypto platforms that comply with strict disclosure and compliance standards.

Since October 2023, the CSA has allowed trading of certain fiat-pegged stablecoins (e.g., USDC, USDT), provided issuers and trading platforms meet specific conditions. The conditions include having fully backed reserves in CAD or USD, monthly disclosures of reserves, audit reports and redemptions rights, and filing pre-registration undertakings (PRUs) for trading platforms/issuers.

The interim rules apply only to fiat-backed coins pegged to CAD or USD. Other types of stablecoins — such as crypto-backed or algorithmic assets — are currently not permitted in Canada.

Major cryptocurrency exchanges ByBit and Binance exited Canada in May 2023 due to these regulations, suggesting the framework would limit the decentralized aspect of cryptocurrency.

What does the future hold for stablecoins in Canada?

Canada is actively developing its own legislation. The Office of the Superintendent of Financial Institutions (OSFI), together with the Department of Finance and the

Bank of Canada

, is working on a comprehensive national framework covering issuer licensing, reserve rules, redemption rights, consumer protection and direct oversight. This builds on earlier guidelines that treated banks’ stablecoin holdings like other crypto assets.

Paul Pincente believes the introduction of a solid stablecoin pegged to the

Canadian Dollar

could help establish better infrastructure for the digital asset landscape in Canada.

  • Stablecoins: The cryptocurrency that keeps central bankers up at night
  • Are bank-backed cryptocurrencies the future? One Canadian lender wants to find out

“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.