CryptoSlate
Canada's Nov. 5 budget proposes requiring banks and other federally regulated financial institutions that issue stablecoins to do so through separate, non-financial subsidiaries. Those issuers would fall under the Stablecoin Act alongside nonbank issuers, with the framework also extending to foreign institutions outside Canadian prudential supervision. Covered tokens would need reserves worth at least their outstanding face value and support redemption at face value in the currency they track, but bank affiliation would not turn them into insured deposits.
Why it matters
The budget would close a major regulatory gap by routing financial-institution issuance into the same statutory framework applied to other stablecoin issuers. Legislative amendments to the Bank Act, Trust and Loan Companies Act, and Insurance Companies Act would prohibit federally regulated institutions from issuing stablecoins directly, while subsidiaries would assume the regulated role.
The Bank of Canada would register non-financial-institution issuers, supervise compliance, monitor issuance and redemption risks, and pursue enforcement action. The proposal would also address foreign financial institutions outside Canadian prudential supervision, including a clarification that covered stablecoin issuance is not deposit-taking for relevant foreign banks and affiliates.
For holders, the framework combines reserve and custody protections with an explicit limit on what those protections mean. Qualified custodians would segregate reserve assets from other creditor claims, but covered stablecoins would be prohibited from being deposits, publicly insured instruments, or government-guaranteed or backstopped products. Issuers also could not suggest that a token has those features merely because a bank parent is involved.
Market impact
The proposal creates a regulated path for established financial institutions to participate in stablecoin issuance without placing tokens inside the deposit-insurance perimeter.
Frequently asked questions
-
How would Canadian banks be allowed to issue stablecoins?
The proposal would require banks and other federally regulated financial institutions to issue stablecoins through separate, non-financial subsidiaries regulated under the Stablecoin Act.
-
Would a stablecoin from a bank-owned issuer be deposit insured?
No. Covered stablecoins would remain separate from publicly insured deposits, and bank affiliation alone would not convert them into insured savings balances.
-
What protections would apply to covered stablecoins?
Issuers would need reserves worth at least the outstanding face value, qualified custody with segregated reserve assets, and redemption at face value in the currency the token tracks.
-
Would the framework apply to foreign financial institutions?
Yes. The proposal would extend the framework to foreign financial institutions outside Canadian prudential supervision and clarify that covered issuance is not deposit-taking for relevant foreign banks and affiliates.
-
When would Canada's stablecoin framework begin operating?
The operating provisions require an order from the Governor in Council. A proposed-regulations impact statement identifies fall 2027 as the intended commencement window for the wider framework.
CoinTelegraph
WatcherGuru
TheBlock
CoinDesk