History
In 1897, agents from the British Empire, including Canada's Postmaster General William Mulock, attended the Universal Postal Union conference in Washington. Their object was to convince other Empire Nations to establish an overseas penny postage rate. They failed but, in 1898, Mulock traveled to Britain to present a new proposal for the penny postage rate. This time the conference agreed to allow Empire nations to participate.
The Process
Canada proposed the penny postage rate be effective on Christmas day, 1898. The Conference granted the request, with no inclination to commemorate Christmas. The new stamp design for the colonial countries still needed Queen Victoria's approval.
Why They're Christmas Stamps
A postal official suggested to Queen Victoria the new stamp honor the prince, meaning the Prince of Wales. In a jealous tone the Queen replied, "What prince?" The official understood her tone and said, "The Prince of Peace," referring to the baby Jesus, which soothed the Queen, Therefore, the stamp released on December 7, 1898 included the words "xmas 1898," along with Mercator's map.