Torys on Budget 2025: supporting innovation in financial services

Technology-led innovation in the Canadian financial sector is transforming the way Canadians access and use financial products and services. In the 2025 Budget (the Budget), the federal government (the government) reaffirmed its objective to modernize Canada’s payment systems by committing to launch Canada’s Real-Time Rail in 2026 and to implement two new legislative frameworks: one governing consumer-driven banking and the other governing fiat-backed stablecoins. 

Advancing the consumer-driven banking framework

While many anticipated that the government would announce its intention to introduce legislation to complete the Consumer-Driven Banking Act (CDBA), the Budget contained several surprising announcements with respect to its plans to move forward with the CDBA’s implementation and oversight.

The biggest surprise is the transfer of the CDBA’s administration and oversight from the Financial Consumer Agency of Canada (FCAC) to the Bank of Canada (the Bank). The Budget provides that this transfer of responsibility will allow the Bank to “build on its oversight activities of payment service providers”. This reasoning makes sense in light of the anticipation that payment service providers (PSPs) intend on becoming participating entities; however, under the present framework, the only institutions that are legislatively required to participate under the CDBA are the large banks. How many PSPs intend on becoming participating entities is still not known. 

Transferring oversight responsibilities to the Bank also better aligns with the government’s heightened focus on Canada’s competitiveness. The FCAC’s mandate is, first and foremost, one of consumer protection, whereas the Bank of Canada is likely to bring a more competition-focused approach. Particularly as the Bank’s mandate under the Retail Payment Activities Act (RPAA) is “to supervise and regulate retail payment activities performed by payment service providers in order to foster competition and innovation in payment services by building confidence in the retail payment sector” (emphasis our own). A goal of fostering competition also aligns with the approach adopted in numerous jurisdictions in which one of the primary objectives of open banking is to foster competition in banking services. 

As the Financial Consumer Agency of Canada Act (the FCAC Act) has already been amended (and received Royal Assent) to provide for the administration and enforcement for the CDBA, the government will need to decide whether the Bank’s administration and enforcement of the CDBA will align with the framework already established under the FCAC Act, or whether this framework will be abandoned in favour of the administration and enforcement framework applicable to PSPs under the RPAA. Although the RPAA’s enforcement framework and the current enforcement framework governing the CDBA under the FCAC Act are very similar, there are some important distinctions. For example, the RPAA allows the Bank to reduce an administrative monetary penalty by half if the PSP enters into a compliance agreement, whereas the FCAC Act does not provide this flexibility.

The government’s commitment in Budget 2025 to “accelerate the next phase of consumer-driven banking, including legislating the ability to direct actions, such as switching accounts or making bill payments, or ‘write access’, by mid-2027, once Canada’s Real-Time-Rail project is live and in widespread use” was welcome news. Other jurisdictions with open banking systems reveal that the better use cases for open banking are found when it allows for direct actions, including transfers of funds. 

The government also announced its intention to revert to its initial plan of providing for a data-mobility right in the Personal Information Protection and Electronic Documents Act (PIPEDA) rather than in the CDBA—a sensible decision that will avoid duplication and potential conflicts in the application of requirements.

Stablecoin regulation takes centre stage

The Budget introduces a landmark framework to regulate fiat-backed stablecoins, signaling a shift away from the current regulatory framework of characterizing such instruments as securities. Ottawa plans to allocate $10 million over two years for the Bank of Canada to oversee implementation, with ongoing annual costs of about $5 million to be recovered through issuer fees. This initiative aligns Canada with other global stablecoin frameworks, such as the U.S. and Europe.

Under the proposed legislation, stablecoin issuers will be required to maintain adequate asset reserves, establish redemption policies, implement risk management frameworks, and safeguard personal and financial data. Amendments to the RPAA will extend regulatory oversight to payment providers using prescribed stablecoins. These measures are designed to support the integrity of the stablecoin framework and ensure financial stability, as stablecoins share of global payments continues to increase.

While the Budget announcement focuses on fiat-backed payment stablecoins, we expect any forthcoming regime to impact adjacent areas, such as tokenized deposits, custody of reserve assets and on-chain settlement more broadly. These developments are part of a global convergence toward “cash-on-chain” frameworks seen in the EU, UK and U.S.  

With stablecoins projected to become integral to global payment rails, the recent Budget announcement signals Canada’s alignment with other global partners and confirms the growing trend of money moving onto the blockchain.