Canada is at risk of relinquishing monetary sovereignty if it allows stablecoins to be pegged to the US dollar. If stablecoins pegged to the US dollar become widely used for Canadian “everyday” transactions, and the global stablecoin market is already dominated by the United States (already approximately 99 percent of stablecoin market value), then demand for Canadian dollar–denominated payment systems could decline, resulting in a weakened position for Canada.
All it takes is one “killer app,” says Jeffrey Klinck, that makes it easier and cheaper for Canadians to pay in stablecoins pegged to the US dollar versus the Canadian dollar, to erode monetary sovereignty and leave Canadians more dependent on the economic conditions and policy decisions of the United States. To protect monetary sovereignty, Canadian policy makers should explicitly plan for varying degrees of US dollar stablecoin adoption, and must accelerate work on public and private digital payment infrastructures.
