Canada’s Stablecoin Framework Takes Shape: Proposed Stablecoin Regulations Released for Comment

On October 24, 2026, the Department of Finance published the proposed Stablecoin Regulations (Proposed Regulations) in the Canada Gazette, Part I. The Proposed Regulations would bring into force the Stablecoin Act (SCA), which received royal assent in March 2026, and make related amendments to the Retail Payment Activities Act (RPAA). These amendments would bring payment service providers engaged in stablecoin-related activities within scope of the RPAA, such as providers of custodial wallets for stablecoins and crypto payment processors. The government intends for the framework to take effect in fall 2027.

Background and Overview of the Regime

A stablecoin is a digital asset recorded on a blockchain that is designed to hold a fixed value relative to a single government-issued currency, such as one coin for one Canadian or U.S. dollar. Stablecoins are increasingly used as a faster way to make payments, particularly across borders. In Canada, securities regulators have taken the view in published guidance that stablecoins would generally constitute a “security” under provincial and territorial securities legislation, subjecting stablecoin issuers to extensive issuer-level regulation, including the prospectus requirement, and subjecting firms in the business of trading in stablecoins to the registration requirement. Certain stablecoin issuers currently offer stablecoins under a prospectus and have obtained exemptive relief from certain securities law requirements. However, securities regulators have been clear that their approach to regulation of stablecoin issuers is an “interim” framework intended to address investor protection concerns in the absence of an alternative regulatory regime with a comprehensive framework for the regulation of stablecoins. Historically, there has been no such alternative comprehensive framework governing the issuance of stablecoins.

The SCA fills that gap by requiring stablecoin issuers to register with and be supervised by the Bank of Canada. It applies to stablecoins used across provinces or internationally, but not to stablecoins usable only within a closed merchant network (similar to a gift card). Regulated financial institutions, such as banks and credit unions, are excluded. Importantly, once in force, the SCA would regulate issuance activity in Canada by both domestic and foreign issuers that are not prudentially regulated financial institutions, meaning that non-Canadian issuers that issue stablecoins into Canada would be subject to the SCA. Based on current market players, the government expects about five issuers to be regulated under the SCA, including the issuers of QCAD, CADC and USDC.

Related amendments to the RPAA regime would bring a broader range of entities engaging in payment functions in respect of stablecoins within scope of the RPAA, triggering registration and ongoing compliance requirements, including in respect of safeguarding stablecoins held on behalf of end users.

Key Requirements

Once in force, the SCA would require stablecoin issuers to apply for registration with the Bank of Canada, maintain a reserve of assets denominated in the underlying fiat currency and backed on at least a one-to-one basis, offer stablecoin holders redemption on a one-to-one basis in that currency, and establish and adhere to policies related to corporate governance, risk management, data security, and recovery and resolution.

The Proposed Regulations would operationalize the SCA by elaborating on requirements for issuer registration, reserve asset management, redemption, policy development, public reporting and other elements. Applicants would also be subject to a national security review, as the SCA enables the Minister of Finance to review stablecoin issuers for risks related to national security.

Proposed Regulations

The Proposed Regulations would provide additional clarity and specificity beyond the framework established under the SCA in the following key areas:

Scope and Definitions

The Proposed Regulations clarify that the issuer is the entity that controls both creating a stablecoin and making it available and remains responsible under the SCA even if it outsources issuance-related activities. Closed loop stablecoins, which are outside the scope of the SCA, are defined to mean those that are usable only within a defined network of merchants and that can be redeemed in fiat currency only from the merchant, a member of the group of merchants or a person affiliated with the issuer.

Prohibitions

The Proposed Regulations clarify the statutory prohibitions on (1) making false or misleading representations, (2) paying interest or yield tied to the holding of a stablecoin, and (3) representing a stablecoin as legal tender, a deposit or proof of deposit, or insured under a public deposit insurance system or guaranteed or backstopped by a government. False representations would include any terms, logos or symbols suggesting any of the foregoing or that the issuer is registered with the Bank of Canada when it is not. This does not prevent the use of the name of the reference currency of a stablecoin or the use of a symbol that is associated with the reference currency of a stablecoin in the stablecoin’s name or in its symbol.

Issuers would also be prohibited from entering into arrangements with any parties, including those who are not stablecoin holders, that allow the person to receive an interest or yield from the holding of a stablecoin issued by the issuer, including through income sharing, or that encourage the person to grant or pay an interest or yield to the holder of a stablecoin issued by the issuer. However, a reward or payment that is tied to a stablecoin transaction but is not tied to the holding of a stablecoin is not an interest or yield.

Redemption and the 1% Fee Cap

Issuers would be required to redeem stablecoins on request, regardless of value (i.e., without a minimum redemption amount), within three business days. Issuers could limit daily redemptions only if a liquidity shortfall in the markets where reserve assets are traded prevents them from meeting all requests.

Redemption fees could not exceed 1% of the redeemed amount. A seven-day notice published on the website would be required before fees are introduced or increased. Issuers would need to have a bilingual redemption policy describing the redemption process and available payment methods.

Reserve of Assets

At the end of each day, the reserve’s market value would need to be equal to or exceed the par value of outstanding stablecoins. It may consist only of government debt maturing in three months or less, demand deposits, qualifying money market funds and one-business-day reverse repurchase agreements under which the issuer purchases such government debt.

Under the SCA, reserve assets must be held in a bankruptcy-remote segregated account with a qualified custodian and may not be encumbered, except that the Proposed Regulations would permit issuers to sell government debt under one-business-day repurchase agreements solely to obtain the reference currency needed to meet redemptions. Issuers may withdraw returns on reserve assets provided the reserve remains at least equal to the value of outstanding stablecoins.

Policies

Issuers would need to set objectives for their governance, risk management, data security, and recovery and resolution policies and, for each, identify the responsible senior officer, the human and financial resources needed to implement it, and the roles and responsibilities of the persons involved, and maintain sufficient funds to implement and maintain the policies.

Policies would need to be reviewed yearly or before any significant change and summarized in plain language on the issuer’s website in English and French.

Registration and National Security Review

The Proposed Regulations prescribe the information an applicant would need to submit to the Bank of Canada to be a registered issuer.

Required information includes the stablecoin’s name and creation process (including reserve management), whether the applicant is publicly traded, qualified custodians, third-party service providers, and, for national security purposes, details on owners, directors, senior officers, major creditors and any state-owned enterprise interest. Applicants would need to provide information requested by the Bank of Canada and notify the Bank of Canada of changes to their application within 15 days. The Minister of Finance would have 60 days, beginning the day after receiving a copy of the application, to decide whether to review it for national security concerns, extendable by 60 days, and any review must be completed within 180 days, extendable by 180 days. This process mirrors the national security review framework under the RPAA.

Reporting and Disclosure

Under the SCA, issuers would submit monthly reports to the Bank of Canada that include a certified accountant’s opinion on the value of outstanding stablecoins and the composition and adequacy of the reserve, prepared in accordance with Canadian generally accepted accounting principles or the International Financial Reporting Standards, and, at the Bank of Canada’s request, a lawyer’s statement on compliance with the reserve encumbrance and custody requirements.

Under the Proposed Regulations, monthly reports would also cover stablecoins issued to and redeemed by persons in Canada, the names of qualified custodians and of distributors or other entities through which stablecoins are made available to Canadians, and a summary of the complaints received from holders and the result of each complaint resolved.

Notices of Incident and Significant Change

Issuers would need to notify the Bank of Canada without delay of any incident, describing its timing and impacts, and provide updates as remedial measures are taken.

Notices of significant change would generally be due at least seven days before the change, with longer periods for certain national security-related information and notice as soon as feasible for others, such as board changes. Each notice would need to set out the reason for the change, its effective date, the issuer’s assessment of its impacts and a list and summary of amended documents.

Administrative Monetary Penalties and Assessment Fees

The Proposed Regulations would establish penalties of up to C$1-million for serious violations and C$10-million for very serious violations, having regard to harm, history, and the degree of intentionality and negligence. Annual assessment fees would be tiered by the average monthly value of outstanding stablecoins, with a base fee of C$750,000 for issuers at or above C$1-billion, C$350,000 for issuers at or above C$500-million but below C$1-billion, and C$25,000 (with no variable amount) for issuers below C$500-million, adjusted for inflation.

Amendments to the RPAA

The RPAA currently applies to payment functions performed by payment service providers (PSPs) in fiat currency. In March 2026, the Budget 2025 Implementation Act, No. 1 amended the RPAA, including adding as a payment function the transmission or maintenance of an end user’s private key, which would apply to payment functions performed in prescribed stablecoins; these amendments are not yet in force.

The Proposed Regulations would amend the Retail Payment Activities Regulations (RPAR) to prescribe stablecoins as a unit, so that PSPs performing payment functions using prescribed stablecoins (those issued by an issuer under the SCA or by a regulated financial institution subject to substantially similar laws) would be in scope of the RPAA and be subject to registration, fund safeguarding and operational risk management requirements.

The Proposed Regulations would provide a new safeguarding option available to PSPs holding stablecoins on behalf of an end user, such as PSPs providing digital wallets. Under this safeguarding option, the stablecoin would be held with a separate entity whose sole purpose is holding end-user funds and is the registered holder of the stablecoins on a distributed ledger. This entity and the rights associated with the stablecoins must not form part of the PSP’s assets in the event of insolvency, and the entity and PSP must enter into a contract ensuring the stablecoins do not belong to the PSP.

PSPs would also be required to have procedures in place to provide end users with access to their funds without delay in the case of the insolvency of the issuer of the stablecoin, including procedures that address the redemption of the stablecoin into the reference fiat currency, and to notify issuers without delay of any operational incident that has a material impact on the issuer.

Securities Considerations

Canada’s securities regulators have not formally confirmed how they intend to modify their approach to stablecoin regulation following the implementation of the SCA. However, the federal regulatory framework to be established by the SCA appears to address many of the investor protection concerns associated with holding stablecoins initially identified by securities regulators. It is widely expected, including based on comments made by the CEO of the Ontario Securities Commission in public appearances, that securities regulators will step back from regulating stablecoin issuers once the SCA comes into force in order to avoid overlapping regulation, but that they may retain their role in supervising how stablecoins are traded or used on crypto asset trading platforms (CTPs). This is consistent with statements in a federal Department of Finance policy paper issued earlier this year that the “use and exchange of fiat-backed stablecoins will continue to be regulated according to how they are used,” with securities regulators regulating trading of stablecoins on securities exchanges and CTPs. For additional details, please also see our prior bulletin, Trading in Stablecoins in Canada: New OSC Decision Offers Relief From Registration.

Next Steps

Comments may be submitted until December 23, 2026, and the government intends for the framework to take effect in fall 2027.

Once the Proposed Regulations are finalized, the Bank of Canada will publish guidance on its supervisory expectations. In the meantime, issuers, CTPs, wallet providers and other payment businesses should consider how the framework would apply to their activities and whether to submit comments before December 23, 2026.

Issuers that were already issuing stablecoins before the SCA comes into force would be relieved of the requirement to register before issuing, so long as they file an application within 30 days of the coming-into-force date of the SCA, until they are registered or refused registration. Their applications would need to include a plan for the orderly resolution or winding down of their stablecoin activities if the application is refused, and issuers that miss the 30-day window or are refused would be required to cease issuing.

For more information, please contact any member of our Financial Services Regulatory group.