Canada Prohibits Financial Institutions from Directly Issuing Stablecoins

The Canadian government is moving to prohibit banks and insurance companies from directly issuing stablecoins. To issue stablecoins, they must establish non-financial subsidiaries, a measure aimed at enhancing the stability of the financial system and consumer protection. The Canadian Ministry of Finance announced the related legal amendments in the 2026 federal budget proposal. According to the amendments, financial institutions will not be allowed to issue stablecoins directly and must do so only through non-financial subsidiaries. There are plans to extend regulations to foreign financial institutions as well. The Canadian government is preparing detailed regulations under the Stablecoin Act, which includes a 100% reserve requirement and a ban on interest payments. Issuers must secure high-quality liquid assets as reserves equivalent to the value of the stablecoins and must pay in legal tender within three business days upon redemption requests. Redemption fees are capped at 1%, and interest payments are prohibited. The central bank will oversee the registration of issuers and compliance with regulations. The government aims to gather opinions on the draft enforcement decree by December 23 and plans to implement it in the fall of 2027.

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