Canada's federal budget, tabled Nov. 5, proposes requiring banks and other federally regulated financial institutions to issue stablecoins only through separate subsidiaries — entities that would then fall under the country's Stablecoin Act alongside nonbank issuers.

Under the proposal, those subsidiaries would be designated as 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 — if enacted, bank-affiliated entities and independent nonbanks would operate under the same stablecoin rules.

Even with a bank-owned issuer, any stablecoin would remain within a framework that keeps covered tokens separate from publicly insured deposits.

Legislative changes

The budget's legislative annex proposes amending the Bank Act, the Trust and Loan Companies Act, and the Insurance Companies Act to bar federally regulated financial institutions from issuing stablecoins directly. The existing Stablecoin Act currently excludes financial-institution issuers, subject to regulations. Routing issuance through a non-financial-institution subsidiary would place the issuing entity inside the stablecoin framework — the proposed route for federally regulated institutions to issue under this regime.

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. A bank-owned subsidiary designated under the Act would fall under that registration-and-supervision perimeter rather than the prudential framework governing its parent.

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

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

What holders would receive

Once applicable, the Act's safeguards would require stablecoins to be redeemable at face value in the currency they track. Issuers would need to hold reserves worth at least the outstanding face value, and reserve assets would have to sit in qualified custody that segregates them and shields them from creditor claims by the issuer and custodian — except for holders' redemption claims. Those duties remain subject to the Act's statutory and regulatory terms. Because bank-owned subsidiaries would be regulated under the Act, tokens they issue would carry the same redemption and reserve requirements as those from nonbank issuers.

Sections 33 and 34 would prohibit covered stablecoins from being deposits, publicly deposit-insured instruments, or government-guaranteed or backstopped instruments, and would bar any representations suggesting such features. A bank parent's involvement would therefore not convert the token into an insured savings balance.

The budget also promises continued engagement on stronger consumer protections in the event an issuer or custodian becomes insolvent — a signal that insolvency-time arrangements in the framework are still taking shape.

Timeline

The Stablecoin Act received royal assent on March 26, but its operating provisions take effect only on dates set by order of the Governor in Council. An Oct. 24 proposed-regulations impact statement identifies fall 2027 as the intended commencement window for the wider framework.

The budget's new measures address who would issue within the framework; actual implementation still depends on legislation and commencement. From here, the markers to watch are the budget measures advancing as legislation, regulations moving from proposal to final form, and the Governor in Council's commencement order against the fall 2027 window.