On October 24, 2026, the federal government published the proposed Stablecoin Regulations in the Canada Gazette, Part I, Volume 160, Number 43. The draft regulations are needed to bring the Stablecoin Act into force, and they set out what issuers must file to register with the Bank of Canada and how they must comply. The public consultation runs until 11:59 p.m. EST on December 23, 2026.
If you issue a stablecoin, hold one for customers, or process payments in one, this draft affects you. Below is what it says and what to do before the comment period closes.
This post is general information, not legal advice. The regulations are proposed and may change before they are finalized.
Why Canada is regulating stablecoins now
The Stablecoin Act received royal assent in March 2026. It creates a framework for stablecoins with interprovincial and international reach, which until now had no comprehensive federal regime. Today, provincial and territorial securities regulators oversee stablecoins mainly through crypto-asset trading platforms, under CSA Staff Notice 21-333.
The government says the proposed Regulations would also facilitate international recognition of Canadian stablecoins and align with global approaches, including the U.S. GENIUS Act, MiCA in the EU, and regimes in Japan, Singapore, Hong Kong and the U.K.
Who is covered, and who is not
Issuers. The Act would regulate domestic and foreign issuers that are not prudentially regulated financial institutions. Banks, trust, loan and insurance companies, credit unions and foreign financial institutions are outside it.
Control decides who is the “issuer.” Under s. 2 of the draft, to “create” a stablecoin means to control its properties, including its design and the management of its generation, and to “make available” means to control its distribution. The Department of Finance explains that the entity controlling both is the issuer, and that an issuer can outsource activities and still carry the Act’s obligations.
Canadian holders define the regulated pool. Under s. 3, a stablecoin counts as “purchased” when the buyer’s usual residence, head office or principal place of business is in Canada. That definition drives reserves, redemption, reporting and fees.
Closed-loop exception. Under s. 5, a closed-loop stablecoin can only be spent with a specific merchant or group of merchants (or transferred for that purpose), and can be redeemed for fiat only through that merchant or group, or a person affiliated with the issuer. The Department compares this to a gift card or an internal settlement mechanism rather than a general-purpose means of payment.
Registration with the Bank of Canada
Issuers must apply through the Bank’s electronic system (s. 8). The application asks for the stablecoin’s name, symbol, reference currency, par value, how Canadians can buy it, its creation process, evidence of reserves, the planned reserve assets, and details on each qualified custodian and third party involved.
The draft also asks for ownership and governance detail. Applicants must provide an organization chart identifying holders of 10% or more of the votes or economic interest. They must also provide information on directors, the most highly compensated senior officers and the five largest creditors, and say whether any state-owned enterprise holds an interest or can appoint management. Applicants must also list the categories of personal and financial information they collect and the countries where that data is stored or processed.
Timelines to note:
- Applicants must respond to Bank information requests within 15 days (s. 9) and report changes to their application within 15 days (s. 10).
- The Minister of Finance would have 60 days to decide whether to open a national security review, extendable in 60-day increments (s. 11).
- A review would run 180 days and could be extended in further 180-day periods (s. 12).
The yield ban and what is still allowed
This will matter commercially for many issuers. The draft clarifies that an issuer cannot use terms, logos or illustrations suggesting it will pay interest or yield, that its coin is legal tender, a deposit or government-insured, or that it is on the Bank’s list of issuers when it is not (s. 13).
On yield itself, the line is between holding and using. Under s. 14, a payment or reward tied to a stablecoin transaction but not to holding it is not interest or yield. But arrangements with other parties, including non-holders, count as indirect yield if they let someone earn a return from holding the coin (including through income sharing) or encourage someone to pay yield to holders. The Department says it reached this position after extensive consultation with fintechs and financial institutions.
Any rewards or partnership program built around a Canadian-facing stablecoin should be tested against s. 14(2) before launch.
Redemption: par value, three business days, 1% fee cap
Section 15 sets out the holder protections. Issuers must redeem on request regardless of amount, complete redemption within three business days, and not charge more than 1% of the redeemed amount. Fees require at least seven days’ notice on the issuer’s website before they start or increase.
There is a liquidity valve. If the issuer cannot meet all requests because of a shortfall in the markets where reserve assets trade, it may limit daily redemptions (s. 15(2)). The redemption policy must be bilingual and must disclose the duty to redeem, the process, the situations in which limits may apply, and the payment methods offered (s. 16).
The Department explains the reasoning on timing and fees:
- Three business days is meant to cover T+1 and T+2 settlement cycles for reserve securities, plus a day for operational processing.
- Market fees currently sit around 0.1%, but a cap that low could be too restrictive for smaller issuers. The 1% cap is meant to leave room for higher per-unit costs.
Reserve assets: full backing, short-dated, Canadian custody
Under s. 17, reserves must be worth at least the par value of outstanding stablecoins at the end of each day. Permitted assets are limited to government debt maturing in three months or less, demand deposits, money market funds invested entirely in eligible assets, and one-business-day reverse repos on that government debt. The Department notes the draft sets no composition limits within those categories, in response to fintech requests for flexibility.
Other reserve rules:
- Issuers may withdraw returns earned on reserves, but only while reserves stay at or above par value (s. 17(2)).
- Reserve assets generally cannot be pledged, but an issuer may use one-business-day repos on eligible government debt solely to fund redemptions (s. 17(4)).
- Custodians must be financial institutions incorporated under federal or provincial law (s. 4), which excludes non-Canadian institutions. The purpose is to make redemption easier for holders if an issuer fails.
- Each stablecoin’s reserve must be segregated from the reserves of other stablecoins (s. 18).
Governance, reporting and fees
Issuers would need governance, risk management, data security, and recovery and resolution policies, each with stated objectives, a responsible senior officer and adequate resources. They would be reviewed yearly, and plain-language summaries would be published in English and French. Complaint handling is built into the governance policy, with a maximum of 7 days to respond and 30 days to resolve a complaint. The risk management and data security policies would also need an independent review every three years.
Reporting centres on a monthly report to the Bank with a certified accountant’s opinion on outstanding stablecoins and reserve composition. A lawyer’s statement on encumbrance and custody compliance is required on request. Notices of significant change would generally be due at least seven days before the change.
Supervision is paid for by issuers. Annual assessment fees are tiered by outstanding value: Tier 3 (under $500 million) pays a $25,000 base fee, Tier 2 pays a $350,000 base plus a variable share, and Tier 1 ($1 billion or more) pays a $750,000 base plus a variable share. The Bank’s estimated annual cost to administer the Act is $2.5 million.
Penalties
The draft designates violations as “serious” (penalties up to $1,000,000) or “very serious” (up to $10,000,000). Failing to maintain adequate reserves or to redeem at par are examples of very serious violations, and the Bank would weigh harm, prior history, and intent or negligence.
Transition for existing issuers
Issuers already operating the day before the Act comes into force would be treated as compliant with the pre-registration requirement if they file an application within 30 days of coming into force. Those who miss the window must stop issuing. The government intends the Regulations to take effect in fall 2027.
What this means for wallets and payment service providers
The draft also amends the Retail Payment Activities Regulations (RPAR). Payment service providers (PSPs) performing payment functions with prescribed stablecoins would come under the Retail Payment Activities Act (RPAA). That means registration with the Bank, operational risk management and funds safeguarding. The prescribed stablecoins would be those issued by entities on the Bank’s list of issuers, and those issued by financial institutions under substantially similar laws.
For custodial wallets, holding stablecoins on behalf of an end user or being indebted to an end user for the stablecoin counts as “holding funds.” The draft creates a new safeguarding option for these PSPs: holding the stablecoins through a separate entity whose sole purpose is holding end-user funds, outside the PSP’s estate. PSPs would also need procedures to give users access to funds without delay if the issuer becomes insolvent, including redemption into fiat.
Scope is real but limited. The Department estimates about 30 PSPs not currently under the RPAA would be brought in, mostly crypto-asset trading platforms with custodial wallets, software wallets and crypto payment processors. The RPAR amendments also expand the ownership and director information collected for national security review, including dates of birth and countries of residence, for all PSPs.
How to participate in the consultation
The Department of Finance encourages comments through the online feature on the Canada Gazette website. All submissions, including attachments, will be published. Comments are due December 23, 2026. Useful topics include:
- the s. 14(2) income-sharing language and its effect on partnership and rewards models
- the Canadian-custodian requirement in s. 4
- the 1% fee cap and the three-business-day redemption window
- how the Bank will assess substantially similar foreign regimes. The Department says that will be addressed in Bank of Canada guidelines.
Next steps for your business
- Map your role. Determine whether you create, distribute, hold or transmit a stablecoin. Control is the test for issuer status.
- Check Canadian exposure. The “usual residence” test in s. 3 determines which coins count toward reserves and reporting.
- Review yield and rewards. Check any rewards, referral or revenue-sharing arrangements against s. 14.
- Check your reserve and custody setup. Confirm that eligible assets and a Canadian-incorporated custodian are possible.
- Plan for RPAA. If you operate a wallet or payments product, assess registration and safeguarding now.
- Consider commenting. Early input is the best chance to shape the final text.
Frequently asked questions
When do the stablecoin regulations take effect?
These are proposed rules. The government’s stated intention is fall 2027.
Who regulates stablecoin issuers in Canada?
The Bank of Canada will register issuers, supervise compliance, monitor risks and take enforcement action under the Stablecoin Act.
Can a stablecoin issuer pay interest?
No. The draft keeps the yield ban, but rewards tied only to using a stablecoin, rather than holding it, are not treated as interest or yield (s. 14(1)).
How fast must redemptions be processed?
Within three business days of the request, with no minimum amount and a fee cap of 1% (s. 15).
Talk to Substance Law
Substance Law advises Toronto and national clients on corporate, contract and regulatory matters, including fintech and payments registration questions. If you are assessing how the Stablecoin Act or the RPAA applies to your business, or want to file a submission, contact our team.
Source: Canada Gazette, Part I, Vol. 160, No. 43 (Oct. 24, 2026), Stablecoin Regulations: gazette.gc.ca/rp-pr/p1/2026/2026-10-24/html/reg1-eng.html
