Canvas is just a 2D drawing API. Whatever you can do with pixels, you can do in canvas. That includes writing Photoshop if you're so inclined.
Now, that in mind, there are limitations and especially for drawing applications it's a shame that you have to think that hard about how to antialias a stroke (approximating it with shadows – really?). So in a way we dragged 2D graphics to the web, but leaving it with a strange mixture of features which date from a range of 1980–2000.