Canada opens bank stablecoin access, but strips deposit guarantees
Canada's budget proposes requiring banks to issue stablecoins through separate subsidiaries regulated under the Stablecoin Act, while removing deposit guarantees.
Canada's Nov. 5 budget proposes requiring federally regulated financial institutions to issue stablecoins through separate subsidiaries, bringing them under the Stablecoin Act alongside nonbank issuers. The proposed subsidiaries would be non-financial institutions regulated under the Act.
Budget 2026 also extends the framework to foreign financial institutions not prudentially regulated in Canada, aiming for consistent treatment across all issuers. 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.
Deposit Insurance Removed
A key aspect of the proposal is that stablecoins issued by bank-owned companies would not be publicly insured deposits. The existing Stablecoin Act excludes financial-institution issuers, but 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.
Consumer Protections
Under the proposed framework, stablecoin issuers would be required to redeem tokens at face value in the currency they track, maintain reserves worth at least the outstanding face value, and provide qualified custody that segregates reserve assets. The Act would explicitly prohibit covered stablecoins from being represented as deposits or publicly deposit-insured instruments.
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, with operating provisions expected to take effect in fall 2027, though implementation still depends on legislation and commencement.
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