Key Takeaways:
Visa Canada and Wealthsimple have piloted stablecoin settlement in Canada for the first time, a move aimed at modernizing a payment infrastructure that still relies on multi-day transfer times. The test used U.S. dollar-backed stablecoins to settle virtual credit card transactions instantly.
"We wanted to show that regulated financial institutions could transact using stablecoins while still honoring the controls and governance that uphold a secure financial system," Hanna Zaidi, Wealthsimple’s vice-president of payments strategy, said in an interview.
The pilot involved a small group of volunteer employees using virtual U.S. dollar credit cards, with all transactions clearing instantly over a weekend, a period when traditional bank transfers are not processed. The test demonstrates a potential solution for payment delays, as Canada’s own real-time rail system has faced several delays. Visa’s global stablecoin settlement pilot recently surpassed a US$7 billion annualized run rate, according to the company.
This initiative is a critical step as Canada seeks to establish its own digital currency framework. With the global stablecoin market valued at $320 billion and dominated by U.S. dollar-pegged assets, experts have warned that Canada risks ceding monetary control if it fails to foster a domestic Canadian dollar alternative.
While the Visa and Wealthsimple pilot used a USD-backed stablecoin, several Canadian firms are developing local alternatives. Tetra Trust recently launched CADD, the first Canadian dollar-backed stablecoin from a regulated financial institution, with support from a consortium including Shopify and the National Bank of Canada. The country’s financial rails clear roughly $424 billion per business day using legacy batch systems.
Other competitors include Stablecorp, which received approval for its QCAD stablecoin, and Loon, which is taking over the existing CADC stablecoin that has already processed over $200 million in volume. These efforts aim to capture a domestic market currently reliant on U.S. dollar products for on-chain transactions.
The push for a Canadian stablecoin comes as Ottawa solidifies its regulatory stance. In March, Canada’s Stablecoin Act received royal assent, and the federal government plans to introduce further regulatory measures in its fall budget. This follows similar moves in the U.S., where Congress passed a bill to create a clear framework for stablecoins.
"It’s important for the industry to understand that there is a way to embrace this technology without completely overhauling your existing systems," Zaidi added, noting the pilot used the same compliance and risk management as all other payment activities. Chris Ferron, Visa Canada’s vice-president of fintechs, said he expects other Canadian banks and fintechs will "absolutely start to follow," stating the pilot "lays the framework and the foundation for them to do that."
This article is for informational purposes only and does not constitute investment advice.
