The Calgary-based fintech startup will become the new issuer of the CADC Paytrie stablecoin.
Calgary-based fintech startup Loon has launched and closed C$3 million in pre-seed funding to develop a regulated Canadian dollar-backed stablecoin. Led by former Toronto employees Paytreethe newly formed company was created to focus solely on Paytrie's revenue growth. Stablecoin CADCwhich is acquired by Loon.
Loon CEO Kevin Zhang envisions CADC becoming a “neutral party for all players in this space.”
CADC, available in 2021, began as an experiment that Paytrie was running on the side while building out its core stablecoin business both initially and beyond. “There wasn’t a lot of fanfare around it,” Paytrie co-founder and Loon co-founder and CEO Kevin Zhang told BetaKit. “We didn’t really push for it.”
For years, Canada's digital asset economy has relied primarily on U.S. dollar-denominated stablecoins, which Luhn said creates a hardship for domestic users and exports value overseas. But Zhang said excitement and interest in stablecoins, including non-dollar ones, has increased significantly over the past nine to 12 months, thanks in part to the U.S. passage of the cryptocurrency-friendly GENIUS Act, which signaled that “stablecoins are here to stay.”
Since the beginning of this year, CADC has completed over $200 million in core network transactions. Zhang said this makes it the leading CAD-backed stablecoin in Canada in terms of usage, and called it a “proof-of-concept” that showed there was enough demand to invest more resources into CADC and bring it under the purview of a new standalone business at Loon. Zhang said this will make it easier to ensure transparency, verifiability and 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 building the foundation for a digital Canadian dollar, an important 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 in product development, expanding its design and compliance teams and engaging with Canadian securities regulators.
Paytree has been working with regulators for more than three years. Zhang said regulators know the company and CADC well but haven't yet decided what they want to do with it, leaving the product “a little bit in a gray area.”
In anticipation of the pending takeover, Loon has pre-filed CADC's prospectus with the Alberta Securities Commission, which it hopes will be the first step toward regulatory approval.
Other Canadian technology companies are also working to bring a Canadian dollar-backed stablecoin to market, including Stablecorp And Tetra Digital Group. Others like Cybridraised money to provide some infrastructure to support stablecoins in Canada.
Stablecorp recently received funding from Coinbase to support QCAD's growth, while Tetra received funding from ATB Financial, National Bank, Purpose Unlimited, Shakepay, Shopify and Wealthsimple in hopes of leveraging its status trust to avoid filing a prospectus for a future CAD stablecoin.
Zhang said he sees room for multiple stablecoin issuers and envisions CADC becoming a “neutral party for all players in this space.”
Paytree initiated the process of converting CADC to Loon several months ago, and Zhang expects it to be completed by the end of the year. Once this happens, Paytrie will still offer CADCs, but will no longer be an issuer.
Zhang said the two companies will be completely independent. He noted that he left his position at Paytrie to focus his efforts on Loon, which has brought in other former Paytrie employees. The company plans to supplement the existing team with new employees.
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CEO of Coinbase Canada Lucas Matheson and other industry leaders are pushing for Canada to develop a federal regulatory framework for stablecoins. This is also at the top of Zhang's wish list.
In September, Ron Morrow of the Bank of Canada said the central bank should “weigh the merits» federal regulation of stablecoins as payment method grows in popularity. “language” around stablecoins included in the future federal budget.
Zhang wants the Canadian government to make supporting innovation in stablecoins and cryptocurrencies a strategic priority and said he hopes the feds will take steps in that direction when they present their budget next month.
Image provided Unsplash. Photo by PiggyBank.
