Coinbase Global Inc., a leading cryptocurrency exchange, is advocating for Canadian policymakers to integrate stablecoins into the nation’s financial system, according to Lucas Matheson, head of Coinbase’s Canadian division. ‘We need our government to get serious about crypto and really weave it into our financial system,’ Matheson stated in a recent interview.
Stablecoins, digital currencies pegged to assets like the U.S. dollar, aim to provide stability within the volatile cryptocurrency market. They offer an efficient and cost-effective method for international money transfers. However, the lack of regulatory oversight poses challenges regarding the transparency and management of reserves by issuers.
In the United States, legislative efforts are underway to establish a framework for stablecoins, requiring them to be backed by real money or short-term treasuries and to provide regular financial disclosures. ‘The U.S. is setting a good example at the top levels, and we hope Canada follows suit,’ Matheson remarked, indicating a desire for Canadian policy to be influenced by American initiatives.
Currently, Canada categorizes stablecoins similarly to other cryptocurrencies, primarily as investment vehicles rather than payment methods. ‘We’re pushing for Canada to define and embrace stablecoins,’ Matheson added, targeting the attention of Canada’s Finance Minister, Chrystia Freeland.
The market for stablecoins has seen significant growth, with Tether (USDT), the largest U.S.-dollar pegged stablecoin, expanding from $10 billion in 2020 to $83 billion by early 2023. Tether reported $5 billion in profit from treasury interest last year. Market analysts at Standard Chartered predict that the global stablecoin market could reach $2.8 trillion by 2028.
In Canada, Shopify has partnered with Coinbase to facilitate stablecoin transactions, aiming to reduce merchant transaction fees. However, the benefits for consumers remain uncertain.
Matheson envisions a future where stablecoins enhance consumer experiences, such as through Shopify’s platform, offering exclusive shopping perks and digital collectibles. ‘Imagine getting digital twins of your purchases as a warranty, a receipt, and a collectible,’ he explained.
Despite potential benefits, concerns about the use of stablecoins in illicit activities persist. Chainalysis reported that $20 billion in stablecoins were transferred to suspicious cryptocurrency addresses in the previous year, constituting 63% of all questionable crypto transactions.
The Bank for International Settlements has expressed apprehension about the impact of stablecoins on financial stability, drawing parallels to historical periods when U.S. banks issued their own currency. ‘We can build a next-gen system on solid ground, or we can relearn the hard lessons about shaky money,’ the institution cautioned.
There is also interest from the stablecoin industry in offering interest on holdings, a practice currently prohibited in the U.S. but under consideration in Canada. ‘It’s not allowed here yet, but our industry’s pushing for it,’ Matheson noted, seeking regulatory reconsideration.
As cryptocurrencies seek greater integration with traditional finance, the need for clear regulations is emphasized to mitigate risks of fraud and misconduct. ‘Regulatory clarity will trump any short-term shenanigans,’ Matheson asserted, confident in the stabilizing effect of well-defined rules.
