Canada opens bank stablecoin access, but strips deposit guarantees

Canada's Nov. 5 budget proposes requiring banks and other federally regulated financial institutions that issue stablecoins to do so through separate subsidiaries, bringing those issuers under the Stablecoin Act alongside nonbank issuers.The proposed subsidiaries would be non-financial institutions regulated under the Act. Budget 2026 also proposes extending the framework to foreign financial institutions that are not prudentially regulated in Canada, with consistent treatment across issuers as its stated goal.A stablecoin issued by a bank-owned company would still fall within a framework that separates covered tokens from publicly insured deposits.The legislative annex proposes amending the Bank Act, Trust and Loan Companies Act, and Insurance Companies Act to prohibit federally regulated financial institutions from issuing stablecoins directly.The existing Stablecoin Act excludes financial-institution issuers, subject to regulations. Routing issuance through a non-financial-institution subsidiary would bring that issuing entity within the stablecoin framework.Canada's proposed stablecoin issuer routesBank parents would issue through non-financial subsidiaries. Foreign financial i...