New rules outline reserve, redemption and custody requirements, while expanding payment oversight to stablecoins.
Canada moved from establishing a federal stablecoin framework to defining how it would operate in practice. The Stablecoin Act received Royal Assent in March 2026 and establishes federal oversight for stablecoin issuance with interprovincial and international applications. On October 24, 2026, the Department of Finance published proposed Stablecoin Regulations for consultation, setting out detailed requirements for registration, reserves, custody, redemption, governance, disclosure, supervision and enforcement. The proposal also amends the Retail Payment Activities Regulations to bring certain payment activities involving stablecoins within the existing payments framework.
Stablecoins are already subject to provincial and territorial securities rules when made available through crypto asset trading platforms, including requirements under Canadian Securities Administrators guidance. The federal framework addresses the issuance of stablecoins with broader interprovincial and international applications and is intended to provide clearer safeguards around reserves, redemption, insolvency, operational risk and consumer protection.
What the Proposed Regulations Would Require
Scope and Registration:
An issuer would be the entity that controls both the creation of a stablecoin and making it available for purchase, even where some activities are outsourced. The regulations also define closed loop stablecoins, such as tokens restricted to a defined merchant network that holders cannot redeem for fiat currency, which would fall outside the Stablecoin Act framework.
Issuers covered by the Act would need to register with the Bank of Canada and provide information on the stablecoin, its creation process, reserves, ownership, senior management, third parties and other relevant business relationships.
The Act does not apply to stablecoins issued by prudentially regulated financial institutions, including banks, credit unions, trust and loan companies, insurers and certain foreign financial institutions.
National Security Safeguards:
Applicants would provide information on owners, directors, senior officers, significant creditors, state ownership, data practices and corporate relationships.
The Minister of Finance would have 60 days to determine whether an application requires a national security review, with extensions available. A review would generally have a 180 day period, which could also be extended. The Minister could direct the Bank of Canada to refuse registration, require undertakings, impose conditions or direct an issuer to take or refrain from particular actions where national security concerns arise.
Interest, Yield and Marketing:
Issuers would be prohibited from paying interest or yield simply for holding a stablecoin, including arrangements where another party provides the benefit with support from the issuer. However, rewards linked specifically to the use of the stablecoin for transactions would be permitted.
Issuers would also be prohibited from presenting a stablecoin as legal tender, a deposit, proof of deposit, a government guaranteed product or a product protected by public deposit insurance.
Redemption:
Stablecoins would need to be redeemable one to one in their reference currency, on request and without a minimum redemption amount.
Issuers would generally need to redeem within three business days, while redemption fees would be capped at 1% of the amount redeemed. Issuers would need to disclose purchase and redemption fees and provide at least seven days of notice before increasing a fee.
A public redemption policy would also need to explain how redemption works and what banking or payment arrangements are used to deliver the fiat proceeds.
Reserves and Custody:
Issuers would have to maintain reserves denominated in the reference currency with a market value at least equal to outstanding stablecoins at the end of each day.
Permitted reserve assets would be limited to highly liquid instruments, including cash and demand deposits, government debt with three months or less remaining maturity, qualifying one day reverse repurchase agreements and money market funds composed entirely of eligible assets. Reserve assets generally could not be pledged to support other obligations.
Reserves would need to be held in segregated accounts with a qualified custodian incorporated in Canada and structured so they remain protected from claims against the issuer or custodian in an insolvency. Where an issuer offers more than one stablecoin through the same custodian, each stablecoin would require a separate reserve account.
This requirement is particularly relevant for Canadian financial institutions because qualified custodians must be eligible financial institutions incorporated or formed under federal or provincial legislation.
Governance, Risk and Consumer Protection:
Issuers would be required to maintain written policies covering governance, risk management, data security, and recovery and resolution. Each policy would have an accountable senior officer, appropriate human and financial resources and an annual review requirement. Plain language summaries would be published in English and French.
Risk management and data security policies would also require an independent review every three years. Recovery and resolution planning would need to cover liquidity stress, issuer insolvency and the orderly winding down of a stablecoin.
Issuers would also need a formal complaint process, with a response within seven days and resolution within 30 days.
Reporting and Regulatory Oversight:
Issuers would submit monthly reports to the Bank of Canada covering stablecoins issued and redeemed in Canada, reserve assets, qualified custodians, distribution partners and resolved complaints. The report would include an opinion from a certified accountant on outstanding stablecoins, reserve composition and compliance with reserve requirements. The Bank could also request a legal opinion on custody and restrictions on the use of reserve assets.
Incidents would need to be reported to the Bank, while most significant planned changes would require at least seven days of advance notice. Certain changes involving personal or financial information and the countries where information is stored or processed would carry longer notification periods. Compliance records would generally be retained for five years.
Fees, Enforcement and Transition:
Bank of Canada supervision would operate on a cost recovery basis. Annual base assessment fees would be:
$750,000 for issuers with at least $1 billion in outstanding stablecoins, plus a variable component
$350,000 for issuers with at least $500 million but less than $1 billion, plus a variable component
$25,000 for issuers below $500 million, with no variable component
Violations would be classified as serious or very serious, with penalties of up to $1 million for a serious violation and $10 million for a very serious violation. Failures involving adequate reserves or redemption at par are examples of very serious violations.
Existing issuers would receive transitional treatment if they apply for registration within 30 days of the Act coming into force. The transition would continue until registration is granted or refused.
Stablecoin Payments Would Also Come Under the RPAA
The proposal reaches beyond stablecoin issuers. Amendments to the Retail Payment Activities Regulations would make qualifying stablecoins prescribed units under the Retail Payment Activities Act.
This means PSPs performing regulated payment functions using these stablecoins could become subject to Bank of Canada registration, operational risk management, incident reporting and safeguarding requirements. The government specifically identifies businesses such as custodial wallet providers, software wallets, crypto asset trading platforms and crypto payment processors among the types of firms that may be affected.
Where a PSP holds stablecoins for customers, its safeguarding framework would also need to address access to customer funds if the stablecoin issuer becomes insolvent, including procedures for redemption into the reference fiat currency. Existing RPAA exemptions, including those for prudentially regulated financial institutions and certain securities related payment activities, would continue to apply.
The government's regulatory analysis estimates that around 30 additional PSPs could enter the RPAA framework. PSPs already regulated under the RPAA are generally expected to apply comparable existing requirements when they begin handling prescribed stablecoins.
Federal and Provincial Rules Will Need to Operate Together
Provincial and territorial securities regulators already regulate the availability of stablecoins on crypto asset trading platforms. During consultation, regulators and provincial governments emphasized the need to reduce regulatory overlap and clarify the respective roles of federal and provincial regimes.
The Stablecoin Act allows the Bank of Canada to exempt an issuer from certain federal requirements where a provincial or foreign regulatory framework is considered substantially similar. The Bank of Canada is expected to provide further guidance on how those exemptions and recognition of comparable regimes would operate.
Consultation and Implementation
The proposed regulations were published on October 24, 2026, with a 60 day consultation period ending December 23, 2026. The government currently intends for the Stablecoin Act and supporting regulations to come into force in fall 2027. After final regulations are published in the Canada Gazette, Part II, the Bank of Canada plans to consult on guidance explaining its supervisory expectations.
For its regulatory analysis, the government assumes an initial market of approximately five issuers and 30 newly captured PSPs, with combined annualized administrative and compliance costs estimated at approximately $240,648. These are regulatory modelling assumptions rather than forecasts of the eventual size of the Canadian stablecoin market.
🚨 What This Signals for the Canadian Financial Sector
The proposal gives the Canadian market its clearest view yet of how federally regulated stablecoins would function. For issuers, the model centres on full reserves, redemption at par, Canadian custody, formal governance, regular reporting and Bank of Canada supervision.
For banks, credit unions, trust companies and insurers, the framework matters even though prudentially regulated financial institutions are outside the issuer requirements of the Stablecoin Act. Canadian financial institutions that satisfy the qualified custodian requirements can hold issuer reserve assets, while stablecoins issued by financial institutions under substantially similar regulatory requirements may also qualify as prescribed units for payments under the RPAA.
For FinTechs, wallets, crypto platforms and payment providers, the impact extends beyond issuing a stablecoin. Performing payment functions with qualifying stablecoins may bring firms within the existing RPAA supervisory framework, particularly where they hold customer assets or facilitate stablecoin payments.
The remaining implementation issues centre on the interaction between federal and provincial requirements, recognition of comparable foreign regimes and the detailed supervisory guidance still to come from the Bank of Canada. With implementation targeted for fall 2027, the current consultation is the key stage for market participants to provide feedback before the framework is finalized.
