Crypto part of Canada’s ‘core’ financial system, but risk concerns remain

The crypto industry has seen a number of regulatory changes over the past year, with the Canadian government taking a risk-management, rules-first approach.

Cryptocurrencies and blockchain technology have increasingly become part of Canada’s core financial system over the past year.

In November, the country introduced stablecoin regulations as part of the Canada Stablecoin Act. Introduced as part of the budget, it gives the Bank of Canada the power to regulate stablecoins in the country.

Elsewhere, policymakers are finalizing amendments to laws for crypto asset funds, including those for cold wallets and custodians.

The changes highlight a pragmatic, but regulation-first approach to crypto, which observers have come to expect from Prime Minister Mark Carney’s government. 

When Canadian Prime Minister Mark Carney assumed office last year, industry observers expected a cautious approach to crypto in Canada.

Carney had previously expressed skepticism about crypto. As Governor of the Bank of England, he said that “Cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users. The short answer is they are failing.”

Still, he called for regulating the crypto space, and said that the underlying technologies could “improve financial stability; support more innovative, efficient and reliable payment services as well as have wider applications.”

In May 2025, Morva Rohani, executive director of the Canadian Web3 Council, said, “With Mark Carney at the helm of the Liberal Party, we anticipate a pragmatic but regulation-first approach to crypto and stablecoins.”

Focusing on regulation has led to increased scrutiny and higher standards for the cryptocurrency industry in Canada.

Naveen Maher, chief compliance officer of Canadian crypto exchange operator WonderFi, noted that the Canadian Securities Administrators (CSA) had closed off the “restricted dealer” registration category. The status was created for targeted firms that do not fit into traditional dealer categories, such as crypto trading platforms. Now they have to become full investor dealers through the CSA, and become members of the Canadian Investment Regulatory Organization (CIRO), a non-profit, national self-regulatory organization.

It led to some consolidation. “That’s a significant shift and it’s removed several players who were sitting in that interim status with a hope that the rules wouldn’t tighten further,” said Maher.

WonderFi “made the call early to get fully registered under CIRO” through its trading platform Coinsquare. This required significant investment and compliance, but now allows the firm to operate “under the highest available regulatory standard in Canada.” 

“The firms that delayed that transition are now looking at a much steeper climb,” Maher said.

Policymakers are also finalizing amendments to National Instrument 81-102, the primary Canadian regulation investment funds and mutual funds, including those containing crypto. 

“These rules raise the bar across the industry and favor established firms like ours, who already have the infrastructure to absorb them,” Maher said. 

Ottawa is also moving to implement the Crypto Assets Reporting Framework from the Organisation for Economic Co-operation and Development. Implementation has been delayed until Jan.1, 2027, but according to Maher, “It will impose annual reporting obligations on every crypto service provider operating [...] For other smaller or offshore players, this may be a real issue.”

Rohani told Cointelegraph on Friday that regulators are also enforcing registration requirements more visibly. On Monday, Canada's Financial Transactions and Reports Analysis Centre (FINTRAC) revoked the money services businesses (MSB) registrations of 47 crypto businesses.

“Industry reaction has been that this is a counterparty risk moment, if your partners are not fully compliant, your own operations are exposed,” she said.

Standards for crypto in Canada may have come closer to those governing the rest of the financial industry, but the policymakers and the blockchain industry are still apart on certain issues.

For the government, the big one was stablecoins, according to Maher. “Once the US moved on stablecoin legislation, Ottawa followed.” After stablecoins, everything else points in the same direction, which is bringing crypto into the traditional financial system, on regulators’ timeline,” she said.

Rohani said that “Canada is beginning to treat parts of crypto as closer to the core financial system rather than purely peripheral, but the primary lens is still risk management.”

The stablecoin legislation was part of this latter concern. “This shift is being driven by Carney in response to rapid developments in the US, particularly frameworks like the GENIUS Act, which are viewed as a geopolitical risk.”

Furthermore, the government is “focused on stability, consumer protection, and ensuring that new digital instruments do not introduce systemic risk,” said Rohani. 

The industry, meanwhile, is seeking more “clear, workable” rules concerning stablecoins, custody and asset tokenization. 

Per Maher, the crypto sector needs harmonization. “Right now, you have FINTRAC, the CSA, CIRO, the CRA [Canada Revenue Agency], and provincial regulators all touching different parts of the same business. The coordination is improving but it’s still fragmented.”

She also noted issues of product access. Stating that Canadians can’t hold crypto in their registered retirement savings plans or their tax-free savings accounts “in any straightforward way.”

In 2018, Carney said that the “underlying technologies” behind crypto “are exciting.” This separation of blockchain from crypto still continues and is visible in the Canadian government’s regulatory approach. 

Rohai said, ”There is still a clear distinction. Policymakers are more comfortable with blockchain as infrastructure.” This is exemplified with Project Samara, where Export Development Canada issued a $100 million Canadian dollar bond on Hyperledger. 

Policymakers, “remain cautious on crypto assets themselves, which are still viewed primarily through a risk and investor protection lens.”

Maher said that the blockchain/crypto split is “not subtle,” stating that Carney has a preference for central bank digital currencies over decentralized assets. 

“This view shapes the administration’s posture which is comfortable with digital assets as a regulated investment category and considerably less comfortable with anything which sits outside that box,” she said.

Financial products which “map cleanly on the existing frameworks” like Bitcoin exchange-traded funds move forward. “DeFi, self-custody, on-chain settlement sits in a different category, and the industry is aware of it.”

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Source: CoinTelegraph