Canada’s 2026 budget proposes requiring banks and other federally regulated financial institutions to issue stablecoins through separate, non-financial subsidiaries. The subsidiaries would fall under the Stablecoin Act, while the tokens themselves would remain outside public deposit insurance. The proposal also aims to bring some foreign institutions into the framework, but still requires legislation to take effect.
Banks would issue stablecoins through subsidiaries
The budget, released on November 5, proposes amendments to the Bank Act, the Trust and Loan Companies Act and the Insurance Companies Act. Federally regulated financial institutions would be barred from issuing stablecoins directly; issuance would have to take place through an independent non-financial subsidiary subject to the Stablecoin Act, putting it under the same framework as non-bank issuers.
The current Stablecoin Act excludes financial-institution issuers but allows regulations to set out exceptions. Under the budget proposal, a bank group’s non-financial subsidiary could come within the Act’s scope. The Bank of Canada would be responsible for registering non-financial issuers, overseeing compliance, monitoring issuance and redemption risks, and taking enforcement action.
Some foreign institutions could also be covered
The budget proposes extending the framework to foreign financial institutions that are not prudentially regulated in Canada, with the aim of applying more consistent rules across issuer types. A legislative annex would also clarify that stablecoin issuance by foreign banks subject to Part XII of the Bank Act, and their affiliates, would not be treated as deposit-taking.
The Act separately excludes central banks. The Bank of Canada governor could grant exemptions, subject to conditions, where provincial or foreign rules are substantially similar to Canada’s framework. The precise scope would depend on regulations, exemptions and the final legislation; the budget proposal does not determine the regulatory status of any specific issuer.
Stablecoins would not be covered by deposit insurance
Once the relevant provisions take effect, regulated stablecoins would have to be redeemable at face value in the currency they are pegged to. Issuers would also have to hold reserve assets worth at least the tokens in circulation. Those assets would need to be held by eligible custodians and segregated from other assets, shielding them from claims by creditors of the issuer or custodian, except where holders exercise their redemption rights. These obligations remain subject to the Act and subsequent regulations.
Sections 33 and 34 of the Stablecoin Act would prohibit presenting regulated tokens as deposits, products covered by public deposit insurance, or products guaranteed or supported by the government. Issuers would also be barred from implying that such protections apply. A stablecoin would therefore not become an insured savings balance simply because its issuer is owned by a bank. The budget also commits to further study of consumer protections in the event an issuer or custodian becomes insolvent.
Start date remains uncertain
The Stablecoin Act received royal assent on March 26, but its operative provisions will take effect on a date set separately by the Governor in Council. A proposed regulatory impact statement published on October 24 set out a target of fall 2027 for implementation of the broader framework.
The budget’s latest proposal chiefly changes which institutions could issue stablecoins within that framework. Implementation details and the effective date remain subject to further legislation and regulatory action.