Good evening, Chair, vice-chairs and honourable members. Thank you for the invitation to appear today.
I'm Morva Rohani and I'm the executive director of the Canadian Web3 Council. We represent companies building digital finance and payment technologies in more than 190 countries, and they're all committed to responsible innovation in Canada.
We support the government's efforts to protect Canada's economic sovereignty and to position Canada for long-term growth. Stablecoins are an important part of that effort.
I want to start with a definition of “stablecoins”. They're digital money designed to hold a steady value, typically one dollar. They allow people and businesses to send payments faster and more cheaply than traditional methods. Think of them as digital cash that moves instantly around the world.
The problem is that Canadians are using American digital dollars. Right now, 98% of the $350 billion in stablecoins worldwide are U.S. dollars. When Canadians use these American stablecoins, their money backs U.S. government debt instead of Canadian government debt. This weakens our economy.
According to the FCAC, 4% of Canadian adults already hold stablecoins. Most of those are likely denominated in U.S. dollars. The opportunity here is that a trusted and robust Canadian dollar stablecoin system can strengthen our economy. It can deliver three benefits.
First, it lowers costs for businesses and consumers. Stablecoins move money faster and more cheaply than traditional banking, helping us to boost productivity.
Second, it creates stronger demand for Canadian government bonds. Stablecoin issuers must hold reserves to back their digital dollars. If those reserves are Canadian treasuries, it creates steady demand for our government debt.
Third, it enables easier trade with Europe and Asia. Canadian dollar stablecoins connected to global payment systems can help businesses trade with partners beyond the United States.
Unclear rules, however, are holding Canada back. Right now, different regulators treat stablecoins differently. Some see them as payment methods. Others see them as investments. Others see them as commodities. This confusion makes it harder for Canadian companies to build here.
Meanwhile, the U.K. and the EU have clearer rules. The U.S. is moving very quickly. If Canada doesn't act, our entrepreneurs will build elsewhere and Canadians will keep using American stablecoins.
Here today, we want to discuss three of our recommendations.
First, create clear and consistent rules for stablecoins across all Canadian laws. Different laws currently treat stablecoins differently, creating confusion for businesses and tax complexity for users. We recommend that Canada clearly define stablecoins as payment instruments under federal law. This would reduce red tape, make Canada more competitive and increase demand for Canadian government bonds. The U.K. and the EU already treat stablecoins this way. Canada has to keep pace with these economies.
Second, allow stablecoin providers to offer reward programs. Current rules prevent stablecoin issuers from offering rewards like cash back or loyalty points, but credit card companies do this every day. This puts Canadian stablecoin providers at a disadvantage against foreign credit card networks and American stablecoin issuers.
The U.S. CLARITY Act, which allows for stablecoins to offer reward programs, is advancing to the Senate. The White House is supporting it. If it becomes law, it would be structurally more attractive for Canadians to use and hold U.S. stablecoins. We recommend narrowing the restriction on interest and yield payments so that Canadian stablecoins can compete fairly. This will encourage more Canadians to use Canadian dollar stablecoins instead of American alternatives.
Third, we recommend that we work with other countries to recognize each other's rules. Canadian stablecoin issuers want to serve customers in Europe and Asia. Foreign issuers want to serve Canadians. If each country requires completely different compliance, it becomes too expensive and complicated.
We recommend that Canada work with key trading partners to recognize equivalent regulations. Having mutual recognition on stablecoins with other countries will let Canadian companies do business more easily overseas while ensuring that foreign providers meet Canadian standards.
The result of that would be a larger market for Canadian dollar stablecoins, supporting trade diversification and strengthening our dollar's role in global payments.
To close, I would just say that we have an opportunity to lead here. A trusted Canadian dollar stablecoin can lower costs for businesses, strengthen demand for Canadian government bonds and support trade with Europe and Asia. Together, these outcomes would protect our economic sovereignty, but we have to act quickly. If we delay, entrepreneurs will build their companies elsewhere and Canadians will keep using American stablecoins. Our economy will be weaker for it.
Thank you so much. I welcome your questions.