A finance company based in Calgary has secured $10 million in funding to develop a digital version of the Canadian dollar, in collaboration with Shopify, Wealthsimple, and National Bank, positioning Canada in the global competition to digitize currency.
Tetra Digital, a financial services entity, aims to introduce a Canadian stablecoin in the coming year. Stablecoins represent a form of cryptocurrency pegged to a nation’s official currency, such as the Canadian dollar, or to a commodity like gold.
These stablecoins are designed to mirror real-world assets on a one-to-one basis digitally. For instance, a stablecoin backed by the Canadian dollar could be exchanged for an actual Canadian dollar anywhere globally without additional charges.
Didier Lavallée, CEO of Tetra Digital, emphasized the current prevalence of U.S. stablecoins and expressed confidence in meeting the anticipated demand for digital assets. He highlighted the importance for Canadian businesses to transact using a Canadian-based vehicle or token.
Advocates of stablecoins envision a future where Canadians can utilize these digital assets for online purchases and seamless cross-border money transfers without delays or extra fees. Unlike traditional banking systems, stablecoin transactions occur on a blockchain network, offering faster exchanges.
Pushing for regulatory measures, Canadian proponents stress the necessity for the government to establish a framework for issuing loonie-backed stablecoins. This urgency mirrors actions taken by the U.S. government with the GENIUS Act, enabling major American corporations like Walmart to issue USD-backed coins.
Addressing concerns of economic “sovereignty,” Lavallée emphasized the importance of Canada having its own stablecoin to support the domestic economy. Stablecoins differ from central bank-issued digital currencies (CDBCs), with the Bank of Canada opting out of developing a digital loonie to focus on researching the global digital asset landscape.
Industry leaders urge Canadian authorities to update regulations to provide clarity for companies interested in launching stablecoins. The classification of stablecoins as securities has sparked debate within the crypto industry, with calls for a regulatory approach akin to that of the U.S. and the EU.
Coinbase, a prominent cryptocurrency platform, advocates for a Canadian-denominated stablecoin to enhance payments and facilitate foreign exchange transactions. The backing of stablecoins by tangible assets necessitates a clear reserves framework, ensuring transparency in asset backing.
Despite the potential benefits of stablecoins, skepticism remains regarding global regulations and asset backing. A lack of clarity on legal treatment and asset verification poses challenges, according to Brent Arnold, a cybersecurity law expert.
Arnold emphasizes the need for stringent asset verification to prevent potential collapses due to unstable asset backing. The involvement of reputable companies like Wealthsimple, National Bank, and Shopify signals a response to consumer demand, although the necessity for a Canadian stablecoin remains a point of skepticism for some experts.