Why Business Lawyers Should Care
The 2025 federal budget pushes long-awaited policy files: artificial intelligence (AI), open banking, and stablecoins. Together, these moves set the stage for a new wave of fintech deal flow, regulatory compliance, and strategic transactions.
For business lawyers in the space, the message is simple: exciting work is coming your way. Clients across finance, technology, and investment will need guidance as Canada’s regulatory environment changes.
Canada’s Innovation Momentum
Canada has a strong presence in the fintech and AI sectors. In fact, Nvidia CEO Jensen Huang attributes the rise of AI to AlexNet, a project out of the University of Toronto that revolutionized deep learning using Nvidia GPUs.
Despite strong momentum, progress slowed. AI policy remained uncertain as businesses waited for the Artificial Intelligence and Data Act (AIDA) to be finalized. Stablecoins were classified as securities by regulators, slowing innovation and spooking investors. Open banking discussions also dragged out without implementation.
KPMG data shows that fintech investment fell in the first half of 2025 due to uncertainty influenced by several factors, but the government’s push for innovation sends a strong signal to investors.
What Budget 2025 Changes
Artificial Intelligence
The government committed over C$1 billion towards AI and quantum computing development, which helps Canadian firms access computing power to train advanced models and promises to embed AI in government operations. This follows Budget 2024’s C$2 billion AI investment package and signals that Canada wants to rejoin the lead in the global AI race.
As government funding increases, expect an uptick in public-private partnerships and procurement contracts for AI infrastructure. These raise issues around intellectual property ownership, confidentiality, and bias auditing.
The move for a comprehensive AI regulatory framework in the form of the Artificial Intelligence and Data Act (AIDA) seems to have been put on hold; however, the recent formation of the AI Strategy Task Force is likely to produce new compliance considerations that will be important for counsel advising innovators in the space.
Stablecoins
The Budget also unveiled Canada’s answer to the US GENIUS Act: a framework to regulate fiat-backed stablecoins, assigning supervision to the Bank of Canada. This will likely require issuers to maintain liquid reserves, transparent redemption rights, and robust controls. Perhaps most importantly, it does not require that all stablecoins be treated as securities. A big hurdle to stablecoin development and adoption in Canada was their designation as securities. Regulating them as a payment form rather than securities eases concerns around taxes and patchy rules across the country. It also better aligns with their use case, which is to facilitate quick on-chain payments with real-time redemption, overcoming the biggest challenges with traditional wire transfers. Stablecoins backed by Canadian Dollar reserves also reinforce the strength of the currency, which is among the top 10 traded currencies worldwide.
For business lawyers, this could further ignite investment in fintech M&A and capital formation as momentum picks up. Stripe’s $1.1 billion acquisition of Bridge shows that deal flow is not just restricted to stablecoin issuers, but extends to infrastructure innovators in the space that aim to make stablecoins more effective and accessible.
The proposed framework would bring fiat-backed stablecoin issuers within the scope of the Retail Payment Activities Act (RPAA), overseen by the Bank of Canada. This means entities issuing or redeeming stablecoins will need to register, maintain a compliance program addressing operational and end-user risk, and meet new reporting obligations.
For counsel, that raises several possible due diligence questions in fintech M&A and financing:
- Has the issuer filed (or prepared) an RPAA registration?
- Are reserve assets held in trust with a prudentially regulated Canadian financial institution?
- Do redemption terms comply with disclosure and liquidity standards?
- Are there cross-border custody arrangements that may require additional licensing or approval?
These details might become standard diligence items and likely affect transaction timing, reps and warranties, and valuation models.
Open Banking/Consumer-Driven Banking
Budget 2025 confirmed the Consumer-Driven Banking Framework, which sets up a governance framework and assigns oversight to the Bank of Canada. This builds on already strong momentum in Canadian open banking among fintech leaders.
WealthSimple, which just closed a Series E round of up to $750 million at a post-money valuation of $10 billion, is among many that advocate for a more innovative and inclusive financial sector. Beyond providing better control to consumers over their data, open banking provides opportunities for fintechs like WealthSimple to innovate. Before the implementation of the framework, consumers could only access third-party products through screen-scraping. Now, the use of APIs will enable a more secure connection and an incentive for new financial service providers to enter the space.
The framework’s accreditation regime will require fintechs and other participants to meet governance, cybersecurity, and financial capacity standards to access consumer financial data through APIs. Lawyers may need to advise on:
- Accreditation and licensing: drafting board resolutions, compliance manuals, and attestations to support applications
- Data-sharing contracts: allocating liability between data holders (banks) and recipients (fintechs) for breaches or misuse
- Consent management: ensuring contracts and disclosures align with the common rules for consent, revocation, and deletion of consumer data
- Cross-border data transfers: advising on privacy and national security review obligations for non-Canadian participants
These new obligations may filter into M&A and financing transactions as diligence questions, representations, and warranties around compliance readiness.
Conclusion
Budget 2025 positions Canada as a serious player in innovation. With AI and fintech investment accelerating, stablecoin rules modernizing, and open banking finally taking shape, transactional and advisory work in the space will expand quickly. Business lawyers who possess both an understanding of the technology and the legal expertise will find themselves at the centre of a very exciting space.
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