Calgary-based FinTech startup Loon has launched and closed $3 million CAD in pre-seed funding to develop a regulated, Canadian dollar-backed stablecoin. Led by former employees at Toronto’s Paytrie, the newly-formed company has been spun up to focus exclusively on the growth of Paytrie’s CADC stablecoin, which Loon is acquiring.
Loon CEO Kevin Zhang envisions CADC serving as a “neutral party to all players in the space.”
CADC, which has been available since 2021, began as an experiment Paytrie ran on the side as it built out its core stablecoin on- and off-ramp businesses. “There hasn’t been a lot of fanfare around it,” Paytrie co-founder and Loon co-founder and CEO Kevin Zhang told BetaKit in an interview. “We haven’t pushed it very hard.”
For years, Canada’s digital asset economy has relied primarily on United States dollar stablecoins, which Loon argues creates friction for domestic users and exports value abroad. But Zhang said excitement and interest in stablecoins, including non-US dollar ones, has increased significantly over the past nine to 12 months, thanks in part to the US rollout of the crypto-friendly GENIUS Act, which signalled “stablecoins are here to stay.”
Since the beginning of this year, CADC has transacted over $200 million in volume on the Base Network. Zhang claimed this makes it the leading CAD-backed stablecoin in Canada in terms of usage, and called it “a proving point” that showed there’s enough demand to invest more resources behind CADC and move it under the purview of a new standalone business in Loon. Zhang claimed this will make it easier to ensure transparency, auditability, and a strong user experience.
Loon’s pre-seed round was led by Vancouver-based Version One Ventures, with support from Kitchener-Waterloo’s Garage Capital and undisclosed Canadian angel investors.
“Loon is creating the foundation for a digital Canadian dollar, a critical step toward a more inclusive and sovereign financial system,” Version One Ventures founder and general partner Boris Wertz said in a statement.
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Loon plans to invest the funding in product development, expanding its engineering and compliance teams, and engaging with Canadian securities regulators.
Paytrie has been working with regulators for more than three years now. Zhang said regulators know the company and CADC well but have yet to decide what they want to do with it, leaving the product in “a little bit of a grey zone.”
In anticipation of its pending takeover, Loon has pre-filed a prospectus for CADC with the Alberta Securities Commission in what it hopes marks a first step towards regulatory approval.
Other Canadian tech companies are also working to bring a Canadian dollar-backed stablecoin to market, including Stablecorp and Tetra Digital Group. Others, like Cybrid, have raised money to provide some of the infrastructure to support stablecoins in Canada.
Stablecorp recently secured funding from Coinbase to support the growth of QCAD, while Tetra has secured funding from ATB Financial, National Bank, Purpose Unlimited, Shakepay, Shopify, and Wealthsimple in hopes of leveraging its trust status to avoid filing a prospectus for an upcoming CAD stablecoin.
Zhang said he sees room for multiple stablecoin issuers, and envisions CADC serving as a “neutral party to all players in the space.”
Paytrie initiated the process of transitioning CADC to Loon a few months ago, and Zhang expects it to be complete by the end of the year. Once that happens, Paytrie will still offer CADC, but will no longer be the issuer.
Zhang claimed the two companies will be completely independent. He noted that he has stepped down from his role at Paytrie to focus his efforts on Loon, which has brought on other former Paytrie employees. The company plans to supplement its current team with new hires.
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Coinbase Canada CEO Lucas Matheson and other industry leaders have been pushing for Canada to develop a federal regulatory framework for stablecoins. This also sits at the top of Zhang’s wishlist.
In September, Bank of Canada’s Ron Morrow indicated that the central bank should “weigh the merits” of federal stablecoin regulation as the payment method grows in popularity. While Canada does not currently have a law regulating stablecoin use, multiple sources have told BetaKit they expect “language” around stablecoins included in the upcoming federal budget.
Zhang wants the Government of Canada to make supporting innovation in stablecoins and cryptocurrency a strategic priority, and expressed hope that the feds take steps towards this when they table their budget next month.
Feature image courtesy Unsplash. Photo by PiggyBank.