Concurrent with the release of Budget 2025 the Government of Canada has released draft legislation within An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 (Budget 2025 Implementation Act, No. 1) that would establish a federal framework for regulating stablecoins in Canada.
The proposed Stablecoin Act (Proposed Act) establishes a framework for the regulation of “stablecoins” as a form of “currency” not meeting the definition of “securities” or “derivatives” under applicable securities law. The Proposed Act is not expected to apply to platform-restricted or single-merchant tokens.
The Bank of Canada will have extensive supervisory and enforcement authority under the Proposed Act, including the power to impose undertakings or conditions on an applicant or issuer, impose administrative monetary penalties, provide public disclosure of non-compliance, impose compliance agreements, and will have the power to restrict or prohibit issuance where necessary for national security or for public interest reasons.
Federally regulated financial institutions such as chartered banks are not covered by the Proposed Act. Financial Institutions will be allowed to invest in stablecoins if that activity does not result in “dealing in securities” which is subject to applicable securities laws or “accepting deposits” which is subject to financial services legislation. Provincially regulated financial institutions are also excluded from the legislation on the same basis. The carve out does not exempt stablecoins from applicable provincial securities or derivatives laws.
The Proposed Act imposes certain duties of care on issuers making stablecoins available for purchase by Canadians and addresses, among other things, the redemption of stablecoins by issuers, the reserve of assets that issuers must maintained to fulfill their redemption obligations and the policies that they must establish.
The Proposed Act will require the Bank of Canada to maintain a public registry of stablecoin issuers under which issuers must apply for registration. To be registered, issuers must provide information regarding:
- ownership and organizational structure;
- technological systems used for redemptions and how issuers plan to meet the reserve requirements, and a legal opinion regarding compliance with applicable legislation;
- a statement from a certified accountant regarding the issuer’s financial condition governance policy;
- risk management policy, data security policy, recovery and resolution policy; and
- any enforcement actions in the areas of anti-money laundering and terrorist financing, financial services, securities and derivatives, market conduct or consumer protection.
The Proposed Act sets out reserve requirements that issuers must meet, including that the reserve must have a value equal to or greater than the par value of all outstanding stablecoins and that it may not be used for any purpose other than redeeming outstanding stablecoins, subject to the regulations. The reserve must consist exclusively of the reference currency or other high‑quality liquid assets be unencumbered and must be held by a qualified custodian Canadian financial institution or other entity as provided in the regulations or through a trust or similar arrangement.
The Proposed Act sets out other obligations on the issuer, relating to misleading advertising, including making representations that suggest a stablecoin is legal tender, a deposit, or insured under a government deposit-insurance scheme. The Proposed Act also prohibits issuers from offering or providing any form of interest or yield on a stablecoin, or on investment returns.
Under the Proposed Act, issuers must establish and publish a redemption policy describing the conditions, manner and timing of redemptions, applicable fees and any third parties involved in the redemption process. Holders must be able to redeem their stablecoins at par value, and issuers must maintain adequate procedures to support timely redemptions.
Among other things, issuers must maintain:
- a comprehensive risk management framework;
- business continuity plans;
- third party oversight and controls to mitigate money laundering and terrorist financing risks;
- separate data security program, dealing with protection of personal information and cybersecurity controls and safeguards; and
- a wind-down plan that ensures the orderly redemption of outstanding stablecoins and preserves the claims of stablecoin holders on the reserve of assets.
Issuers must file periodic reports that include:
- a certified accountant’s report covering the financial condition of the issuer, the number of outstanding stablecoins, and the composition and fair market value of the reserve; and
- a legal report confirming compliance with the reserve encumbrance prohibition and qualified custody and bankruptcy remote requirements.
The Proposed Act does not replace Canadian securities laws, which may apply to the distribution and secondary trading of stablecoins that meet the definition of a “security” or “derivative.” Whether a stablecoin, or related issuance and trading activities, are captured by securities laws depends on the features of the stablecoin and how it is distributed or traded. Canadian securities laws will remain relevant for stablecoins offering yield or exposure to a basket of different assets or currencies, the distribution or solicitation by issuers of stablecoins triggering the dealer, custodial and marketplace requirements under applicable securities laws, including within existing CSA guidance, including:
- CSA Staff Notice 21-332 Crypto Asset Trading Platforms: Pre-Registration Undertakings – Changes to Enhance Canadian Investor Protection
- CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients.
Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 is available for download from the website of the Parliament of Canada.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.