Canada opens bank stablecoin access, but strips deposit guarantees

Canada's Nov. 5 budget proposes requiring banks and other federally regulated financial institutions that issue stablecoins to do so through separate subsidiaries, bringing those issuers under the Stablecoin Act alongside nonbank issuers.

The proposed subsidiaries would be non-financial institutions regulated under the Act. Budget 2026 also proposes extending the framework to foreign financial institutions that are not prudentially regulated in Canada, with consistent treatment across issuers as its stated goal.

A stablecoin issued by a bank-owned company would still fall within a framework that separates covered tokens from publicly insured deposits.

The legislative annex proposes amending the Bank Act, Trust and Loan Companies Act, and Insurance Companies Act to prohibit federally regulated financial institutions from issuing stablecoins directly.

The existing Stablecoin Act excludes financial-institution issuers, subject to regulations. Routing issuance through a non-financial-institution subsidiary would bring that issuing entity within the stablecoin framework.

Bank ownership would not turn a covered stablecoin into a publicly insured deposit.

Budget intentions require legislation. Justice Canada's consolidation current to October 19 marks operating provisions not in force. Regulatory terms and discretionary exemptions matter; the diagram is not a finding about any named issuer.

Sources and evidence

Sources

1. Budget 2026, Chapter 1
2. Budget 2026, legislative annex
3. Stablecoin Act
4. November 5 budget release

Supporting facts

• Budget 2026, released November 5, proposes requiring federally regulated financial institutions that choose to issue stablecoins to do so through non-financial institution subsidiaries regulated under the Stablecoin Act. [1] [4]
• The budget's legislative annex proposes amending the Bank Act, Trust and Loan Companies Act and Insurance Companies Act to prohibit federally regulated financial institutions from issuing stablecoins directly. [2]
• Chapter 1 proposes extending the Stablecoin Act to foreign financial institutions that are not prudentially regulated in Canada, with the stated aim of consistent regulatory treatment across issuers. [1]
• The enacted Stablecoin Act received royal assent March 26, 2026, but Justice Canada's captured consolidation, current to October 19, marks its operating provisions not in force; section 97 requires commencement on a day or days fixed by Governor in Council order. [3]
• The existing, uncommenced Act excludes financial-institution issuers subject to regulations, excludes central banks, and allows the Bank of Canada Governor to grant conditional exemptions where provincial or foreign law is substantially similar. [3]
• Once applicable, sections 33 and 34 of the existing Act would prohibit covered stablecoins from being deposits or publicly deposit-insured, government-guaranteed or government-backstopped instruments, and prohibit representations suggesting those features. [3]
• The uncommenced Act provides for par redemption in the reference currency, reserves at least equal to outstanding par value, and custodian-held reserves segregated from other assets and protected from issuer/custodian creditor claims other than holders' redemption claims, subject to its statutory and regulatory terms. [3]

Method

Source-backed qualitative relationship diagram. Arrows show proposed issuing routes or scope, not fund transfers or quantitative scale. No forecasts or calculations.

Scope

Budget intentions require legislation. Justice Canada's consolidation current to October 19 marks operating provisions not in force. Regulatory terms and discretionary exemptions matter; the diagram is not a finding about any named issuer.

Infographic by CryptoSlate

The Bank of Canada says its role under the Act will include registering non-financial institution issuers, supervising compliance, monitoring issuance and redemption risks, and taking enforcement action.

The planned foreign-institution extension targets institutions outside Canadian prudential supervision. The annex also proposes clarifying that stablecoin issuance is not deposit-taking for foreign banks and their affiliates covered by Part XII of the Bank Act.

The existing Act separately excludes central banks, and also lets the Bank of Canada Governor grant conditional exemptions where provincial or foreign rules are substantially similar.

What holders would receive

Once applicable, the Act's safeguards would require redemption at face value in the currency a stablecoin tracks.

It would also require reserves worth at least the outstanding face value, and qualified custody that segregates reserve assets and protects them from issuer and custodian creditor claims other than holders' redemption claims. Those duties remain subject to the Act's statutory and regulatory terms.

Sections 33 and 34 would prohibit covered stablecoins from being deposits, publicly deposit-insured instruments or government-guaranteed or backstopped instruments, and prohibit representations suggesting those features.

A bank parent's involvement would not convert the token into an insured savings balance.

The budget also promises continued engagement on stronger consumer protections if an issuer or custodian becomes insolvent.

The Act received royal assent on March 26, but its operating provisions take effect on dates set by order of the Governor in Council.

The Oct. 24 proposed-regulations impact statement identifies fall 2027 as the intended commencement window for the wider framework.

The budget's new development concerns who would issue within the framework, while implementation still depends on legislation and commencement.