Source: Cointelegraph
Original text: (Canada lags behind in stablecoin policy but still has room to catch up)
The slow adoption of stablecoins in Canada is raising concerns among local cryptocurrency industry observers, who worry that the country is gradually falling behind in this field.
The Canadian Securities Administrators (CSA) officially classified stablecoins as "securities and/or derivatives" in December 2022, after the FTX incident shocked the market and led many lawmakers to turn against the cryptocurrency industry.
This policy of regulating stablecoins as securities has resulted in very few local stablecoin issuers, while during the same period in the US and EU, the stablecoin market has seen significant growth as the regulatory environment gradually relaxed. Industry observers point out that this situation puts Canada at a disadvantage in global competition.
It is particularly noteworthy that there is a significant gap in Canada's peer-to-peer (P2P) payment space, and stablecoins possess unique advantages that could fill this void.
In 2022, as the cryptocurrency market was shaken by the collapse of FTX and the Terra stablecoin system, global regulators began to scrutinize the crypto space more strictly.
In Canada, the CSA (Canadian Securities Administrators) updated its regulatory requirements for cryptocurrency exchanges and included stablecoins in its regulatory scope, classifying them as securities/derivatives. This decision has sparked widespread discontent in the Canadian crypto industry.
Morva Rohani, founding managing director of the Canadian Web3 Council, stated in an interview with Cointelegraph that the CSA's case-by-case review approach for stablecoin issuers and the lack of a federal-level framework have led to a regulatory system that is "patchwork."
"Canada relies on securities law to regulate payment stablecoins, which introduces significant legal and operational uncertainty," she pointed out.
Tanim Rasul, Chief Operating Officer of Canadian cryptocurrency exchange NDAX, bluntly stated that the CSA "judged incorrectly," believing that other regulatory frameworks, such as the EU's (Markets in Crypto-Assets Regulation) MiCA, are more suitable for the current situation.
"I just want to say, look at MiCA, see how they handle stablecoins. This is a payment tool and should be subject to appropriate regulation," he told attendees at the Toronto Blockchain Futurist Conference on May 13.
Not only has the EU taken action. Singapore and the UAE have also introduced stablecoin regulatory frameworks, while US senators are optimistic about passing stablecoin legislation by May 26.
Rohani pointed out that Canada "is out of step with leading jurisdictions globally [...] these regions have adopted customized, prudent frameworks that recognize stablecoins as payment tools."
Some experts are concerned that the lack of policy consistency compared to other jurisdictions that are more supportive of stablecoins could have a negative impact on the Canadian dollar (CAD).
Som Seif, founder of Canadian investment firm Purpose Financial, stated that the widespread use of other major stablecoins (mostly dollar-denominated) could threaten the position of the Canadian dollar (CAD's nickname) domestically.
"If Canada does not establish a regulatory framework and environment that encourages the development of CAD stablecoins, consumers and businesses will default to using alternatives pegged to the US dollar, which will weaken the importance of CAD in the global market," he emphasized.
Representatives of the Canadian cryptocurrency industry stated that given the country's alleged lack of peer-to-peer payment networks, stablecoins play an important role in the Canadian market.
In an interview with Cointelegraph on May 13, Lucas Matheson, CEO of Coinbase Canada, stated: "Providing stablecoins to Canadians is very important." He noted that the only option currently available is wire transfer, "which costs $45 and takes 45 minutes to complete the paperwork."
Rohani stated that Interac e-Transfer (Canada's funds transfer service) "remains the primary domestic peer-to-peer payment channel, operating through banks and credit unions."
Canada does have applications like PayPal and Wise that support international peer-to-peer transfers, but these services typically charge higher fees and have slower settlement times compared to stablecoins.
Rohani pointed out that while some crypto platforms allow peer-to-peer transfers, these features have not been widely adopted due to a lack of integration with mainstream financial services.
According to the 2024 Digital Payment Report by the Canadian Payment System (the owner and operator of Canada's payment clearing and settlement infrastructure), there is a growing demand among Canadians for more diverse digital payment options.
However, this demand may not directly translate into the adoption of stablecoins. The report noted that there is still a long way to go for cryptocurrencies to achieve financial integration among Canadians. About 91% of Canadians have never used cryptocurrency for payments.
Canadian payment organizations attribute the public's lack of interest in crypto assets to these assets being perceived as "the least secure payment method in the eyes of Canadians, compared to alternatives such as cash, credit cards, checks, wire transfers, and PayPal."
Even in the context of central bank digital currencies (which the crypto industry generally views as less favorable than privately issued stablecoins pegged to fiat currency), public interest remains low. Surveys show that 85% of respondents "indicated they would not consider using a Canadian digital dollar, but would prefer to continue using existing payment methods."
Even if more customized regulatory policies could integrate stablecoins with mainstream payment options familiar to Canadians, this still requires collaborative efforts from Ottawa policymakers, and the Liberals have just achieved victory in the federal elections.
The cryptocurrency industry has had reasons for skepticism. Liberal Prime Minister Mark Carney previously held a cautious attitude towards cryptocurrencies. In a speech during his tenure as Governor of the Bank of England, he explicitly stated that cryptocurrencies have failed as a functional currency.
However, Carney also acknowledged that stablecoins have significant roles in retail and wholesale payments. He stated in 2021 that stablecoins should be allowed to use central bank balance sheets—provided that strong protection mechanisms are established.
"In just a few short years, money market funds have experienced two systemic crises [...] In baseball rules, it's three strikes you're out; in cricket, it's equivalent to only one chance. For a systemic payment system, one crisis is already too much," Carney emphasized.
Kohani stated: "With Mark Carney at the helm of the Liberal Party, we expect to see a pragmatic yet regulation-led approach to cryptocurrency and stablecoin policy."
Although Carney's previous open attitude towards stablecoins indicates his willingness to accept this technology, he also "emphasized the necessity of establishing a regulatory framework, implementing oversight, and security measures."
According to Kohani's analysis, if the Liberal Party returns to power, the Canadian Securities Administrators (CSA) may continue to dominate enforcement while also advancing broader policy development, including a stablecoin regulatory framework, "especially if stablecoins are positioned as a means to modernize payments and maintain the Canadian dollar's related status."
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