On October 24, 2026, the Government of Canada published for public comment proposed Stablecoin Regulations (the “Stablecoin Regulations”) under the Stablecoin Act (the “SCA”), marking a significant development in the establishment of Canada’s federal regulatory framework for stablecoins.
The Stablecoin Regulations provide important details regarding the implementation and operation of the SCA, which received Parliamentary approval in March 2026 but has not yet been brought into force.
The SCA will establish regulatory oversight of stablecoin issuers by the Bank of Canada. The Stablecoin Regulations provide needed guidance on the interpretation and administration of the SCA, and propose amendments to the Retail Payment Activities Regulations (the “RPAR”) that would bring certain stablecoin-related payment activities within the scope of the Retail Payment Activities Act (the “RPAA”). The RPAA regulates payment service providers and is also administered by the Bank of Canada.
The government is targeting implementation of the Stablecoin Regulations in fall 2027, and comments are due by December 23, 2026.
Background: Canada’s emerging stablecoin framework
Stablecoins have increasingly emerged as an important component of digital asset markets, with applications extending beyond speculative cryptocurrency trading to payments, cross-border transfers, settlement and other financial services activities.
In Canada, stablecoins have historically been addressed primarily through provincial and territorial securities law regulatory frameworks, including the Canadian Securities Administrators’ requirements applicable to value-referenced crypto asset (or “VRCA”) stablecoins. VRCA stablecoins are typically made available as a trading pair against crypto (Bitcoin, etc.) by custodial cryptocurrency trading platforms that are regulated akin to traditional securities broker-dealers.
These securities law requirements have not, however, established a comprehensive federal framework governing payment stablecoin issuance and transfer.
The SCA seeks to create a federal regime for the issuance of certain fiat-backed stablecoins. The Stablecoin Regulations supply operational detail on registration, reserves, custody, redemption, governance, reporting and enforcement, alongside proposed changes addressing stablecoin payment services.
1. Registration and Bank of Canada oversight
Issuers falling within the scope of the SCA would generally be required to register with the Bank of Canada before issuing stablecoins. The framework is intended to apply to domestic and foreign issuers engaged in covered issuance activities in Canada, subject to exclusions and exemptions. Specified prudentially regulated financial institutions, including banks, trust and loan companies, insurers and credit unions, are excluded from the SCA issuer regime.
The Stablecoin Regulations focus on issuer control over both the creation and distribution of stablecoins. For example, the Stablecoin Regulations define “create”, meaning to have direct or indirect control over a stablecoin’s properties, including its design and generation, and “make available”, meaning to have control over a stablecoin’s distribution. As a result, outsourcing technical operational activities involving the generation or minting of a stablecoin would not necessarily displace the issuer’s ultimate responsibility.
Also, as the SCA and the Stablecoin Regulations are intended to protect persons that normally reside in Canada, these defined terms are stated in the Stablecoin Regulations to capture stablecoins issued to Canadians, regardless of whether they are ultimately purchased by persons in or outside of Canada.
Registration applications by issuers will require information concerning ownership, governance, reserve arrangements, reserve asset custodians, third parties and technology infrastructure. Applicants will also face national security screening, with the Minister of Finance empowered to direct refusal of registration or impose other measures on national security grounds.
For market participants, a threshold question will be whether activities amount to issuance, including where affiliates or service providers perform parts of the “create” or “make available” process. Foreign issuers will also need to assess whether their existing arrangements can be accommodated in Canada.
2. Reserve assets and Canadian custody requirements
Under the Stablecoin Regulations, issuers will need to maintain reserves denominated in the reference currency with a market value at least equal to the par value of outstanding stablecoins at the end of each day. Eligible “high-quality liquid assets” that can be treated as a part of an issuer’s reserve assets will be limited to:
- Demand deposits, including cash;
- Government debt securities maturing within three months or less;
- Money market funds invested entirely in eligible assets; and
- Certain overnight reverse repurchase agreements (limited to government debt securities maturing within three months or less).
Reserve assets generally must remain unencumbered, subject to a limited overnight repurchase exception to fund redemption requests, collateralized by government debt securities maturing within three months or less. The SCA requires segregated, bankruptcy-remote reserve arrangements with a “qualified” custodian designed to protect stablecoin holders in the event of bankruptcy or insolvency of an issuer or custodian.
The Stablecoin Regulations will require reserves to be held with qualified custodians that are incorporated or formed under Canadian federal or provincial legislation. This is particularly significant for foreign issuers currently maintaining reserves outside Canada. This could create opportunities for Canadian custodians while adding operational complexity for global issuers.
The relationship between the domestic custody requirement and any exemption based on comparable foreign regulation will warrant further clarification (as further described below).
3. Redemption rights and consumer protection
The Stablecoin Regulations will require redemption at par in the reference currency, on request and without a minimum amount, with payment processing to be initiated generally within three business days. Redemption fees would be capped at 1%, with advance public notice of new or increased fees.
Issuers could limit daily redemptions where liquidity shortfalls in markets for reserve assets prevent them from meeting all requests. Public redemption policies would need to explain processes, payment methods and circumstances in which redemptions may be limited.
These requirements put liquidity management and operational readiness at the centre of issuer compliance. Issuers should assess whether banking, reserve liquidation and payment arrangements can support the prescribed timeline, particularly during periods of market stress.
4. Yield permissions and restrictions
The SCA establishes a broad prohibition on issuers offering interest or yield, whether directly or indirectly, in connection with the holding of stablecoins. The Stablecoin Regulations provide further clarity on the scope of this prohibition, including by restricting indirect arrangements such as third-party income-sharing and issuer-funded incentives that encourage holders to maintain larger stablecoin balances or hold stablecoins for longer periods.
Importantly, the Stablecoin Regulations clarify that payments or rewards tied to the use of a stablecoin in a transaction, rather than its holding, would be permitted (including through income-sharing) to encourage adoption of the stablecoin. This distinction provides greater certainty for the structuring of loyalty programs, commercial incentives and distribution arrangements, while preserving the SCA's underlying prohibition on yield-bearing stablecoins related to holding, alone.
By restricting issuers from distributing returns to holders generated from reserve assets, the Stablecoin Regulations seek to maintain a clear distinction between stablecoins, investment products and financial products that compete directly with bank deposits or other interest-bearing instruments.
5. Stablecoin payments and the Retail Payment Activities Act
The SCA makes it clear that issuers are automatically considered money services businesses required to register under Canada’s main anti-money laundering / anti-terrorist financing legislation, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
However, the Stablecoin Regulations provide more information on how the government proposes to integrate the SCA with Canada’s payment service provider regulatory regime, the RPAA. While the RPAA currently applies to payment functions involving fiat currencies, the proposed amendments would extend its application to activities with respect to stablecoins that meet prescribed criteria.
Amendments to the RPAA included with the SCA and draft Stablecoin Regulations would do this by prescribing stablecoins as a “unit” for the purposes of the RPAA’s definition of “retail payment activity.” For this purpose, a stablecoin would generally include stablecoins issued by entities appearing on the Bank of Canada’s list of registered issuers under the SCA to be posted once the SCA comes into force, as well as stablecoins issued by financial institutions subject to substantially similar federal, provincial or foreign requirements relating to yield, redemption, reserves and custody. Financial institutions issuing stablecoins would remain excluded from the RPAA framework.
Closed-loop stablecoins would also be excluded from the scope of the RPAA. The Stablecoin Regulations propose to define these as stablecoins that can only be used to purchase goods or services within a defined network of merchants, nor redeemed for fiat currency other than by the merchant or its affiliates, would be excluded as not being able to be used as a general-purpose means of payment, similar to the way that gift cards function.
Importantly, the use of a prescribed stablecoin would not, in itself, trigger registration under the RPAA. Rather, registration would generally be required where an entity performs a regulated payment function as a service or business activity that is not incidental to another service or business activity, subject to the RPAA's applicable jurisdictional requirements and exclusions. The RPAA contains a range of exclusions that may take some or all of a crypto-asset business's stablecoin activity out of scope, depending on the particular business. The government has confirmed that these existing exclusions would continue to apply in the stablecoin context.
The RPAA identifies several payment functions that can trigger a registration requirement when performed in connection with an electronic transfer of fiat funds. The payment functions themselves are not changing. Rather, under the proposed amendments, they would also capture electronic funds transfers made using prescribed stablecoins. For example, PSP registration may be triggered by an entity that performs any of the following as a service or business activity that are not incidental to another service or business activity:
- Payment accounts: Providing or maintaining an account held on behalf of one or more end users for the purpose of electronic funds transfers, including accounts used to send or receive stablecoins.
- Holding funds: Holding stablecoins on behalf of an end user, including through custodial wallets or being indebted to an end user for stablecoins. This captures the stablecoins themselves, rather than the reserve assets maintained by the issuer.
- Payment initiation: Initiating electronic funds transfers involving stablecoins at the request of an end user.
- Payment authorization and transmission: Authorizing electronic funds transfers or transmitting, receiving or facilitating payment instructions involving stablecoins.
- Clearing and settlement: Providing clearing or settlement services in connection with stablecoin transfers.
Separately, amendments to the RPAA that accompanied the introduction of the SCA include the addition of a new payment function under the RPAA:
- Payment instruments and private keys: Transmitting or maintaining an end user's encrypted or tokenized payment instrument or private key, including certain digital wallet activities.
For this new function, guidance provided in the Stablecoin Regulations states that a private key allows an end user to authorize transactions using prescribed stablecoins, and that encrypting or tokenizing the private key would enable the end user to transmit payment instructions without exposing the key itself.
Notably, this function would apply to payment functions performed in both prescribed stablecoins and fiat currency and clarifies which related activities are brought into scope of the RPAA. These changes would only become operative once the SCA is brought into force on a date to be announced.
It is important to note that performing a single payment function could be sufficient to bring an entity within the RPAA. Foreign entities may also be subject to registration under the RPAA where they perform regulated functions for end users in Canada and direct those services at individuals or entities in Canada, even if they do not have a place of business in Canada.
The proposed expansion of the RPAA is particularly significant for crypto-asset trading platforms, custodial wallet providers and crypto payment processors that offer a distinct payment service. For example, a trading platform that holds stablecoins on behalf of customers, and enables them to send stablecoin payments to third parties could perform multiple payment functions.
Similarly, a wallet provider that maintains or transmits payment credentials or private keys may need to consider whether its activities fall within the expanded statutory framework. The analysis will depend on the provider's actual functions and the applicable statutory requirements, rather than its characterization as a custodial or non-custodial service.
Entities brought within the RPAA are required to register with the Bank of Canada and comply with applicable operational risk management, incident response, reporting, national security and other regulatory obligations, unless they are otherwise excluded or exempt. Safeguarding end user funds is also required to the extent that a PSP is engaging in the payment function of holding end-user funds.
The proposed amendments would also introduce a new end-user funds safeguarding option permitting prescribed stablecoins to be held through a separate entity established solely to hold end-user funds, subject to arrangements intended to protect those assets from the PSP's estate in an insolvency scenario.
The federal government estimates that approximately 30 additional PSPs, including crypto-asset trading platforms offering custodial wallets, software wallet providers and crypto payment processors, could be brought within the RPAA as a result of these amendments.
Accordingly, businesses facilitating stablecoin transactions should assess whether their activities constitute one or more payment functions, whether those functions are performed as a service or business activity that is not incidental to another service or business activity, and whether any statutory exclusions or exemptions apply.
Existing registration or compliance obligations under provincial securities legislation or federal anti-money laundering requirements would not, on their own, resolve whether separate registration under the RPAA is required.
6. Governance, risk management and reporting
Under the SCA and Stablecoin Regulations, issuers will need written governance, risk management, data security, and recovery and resolution policies, with accountable senior officers, adequate resources, annual reviews and, for certain policies, independent reviews at least every three years. Plain-language policy summaries will be published in both official languages.
Monthly reporting requirements will include information on outstanding stablecoins, reserves, custodians and other matters, supported by accountant opinions. The Bank of Canada could also request legal opinions addressing specified reserve custody and encumbrance requirements. Issuers will also have timely incident and significant-change notification obligations.
The proposed administrative monetary penalty framework under the Stablecoin Regulations provides for penalties up to $1 million for serious violations and $10 million for very serious violations. Compliance planning should therefore address governance, outsourced operations and evidentiary records from the outset.
7. International recognition and exemptions
The SCA permits the Governor of the Bank to exempt an issuer from certain requirements where a provincial or foreign regulatory framework is substantially similar. This could be relevant to issuers already regulated in other major stablecoin markets.
The Stablecoin Regulations do not establish a complete process for assessing comparability. The government indicates that additional Bank of Canada guidance will address how these exemption powers may operate. Recognition should not be assumed to be automatic, nor should an exemption be assumed to cover every Canadian requirement.
8. Interaction with provincial securities regulation
The interaction between the federal stablecoin framework and existing provincial securities regulation will remain important. The SCA and the proposed RPAA amendments do not, by themselves, displace provincial securities requirements applicable to crypto-asset trading platforms, value-referenced crypto asset (or VRCA) stablecoins that are currently subject to provincial securities regulation across Canada, or other market participants.
An issuer, distributor or intermediary may therefore need to assess several regulatory regimes in parallel, including the SCA, the RPAA, securities legislation and anti-money laundering requirements. The treatment of stablecoins under securities law, and the scope of activity-based RPAA exemptions, will depend on the relevant facts and legal characterization.
9. Implementation timeline and transitional arrangements
The SCA received Royal Assent in March 2026, but it has not yet come into force. Publication of the Stablecoin Regulations on October 24, 2026 does not itself activate the issuer registration regime under the SCA. The SCA will come into effect on the day it is proclaimed into law by an order of the federal Governor in Council.
The federal government states that it intends for the Stablecoin Regulations to come into force in fall 2027, on a day or days fixed by order of the Governor in Council. This is a target rather than a confirmed commencement date. The consultation on the Stablecoin Regulations closes December 23, 2026. Final regulations would follow, and it is anticipated that the Bank of Canada would publish supervisory guidance for consultation before commencement similar to the approach previously taken with respect to the RPAA.
Existing issuers that were issuing stablecoins immediately before the relevant SCA commencement day would receive transitional relief from the requirement to register before issuing, provided they apply for registration within 30 days. This relief would end upon registration, refusal, or expiry of the application window without an application. Other substantive obligations should not be assumed to be suspended by that registration-specific relief.
Looking ahead
Canada’s proposed framework reflects the growing treatment of stablecoins as part of the financial services and payments ecosystem. It promises greater regulatory certainty but also introduces material compliance and structural questions for issuers, financial institutions, platforms and PSPs.
The Gowling WLG Financial Services and Technology (FSxT) group continues to monitor developments and their implications for Canadian and international market participants. If you have any questions, please contact the authors.
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