🔔 Compliance alert. Canada's Stablecoin Act received Royal Assent through Bill C-15 (Budget Implementation Act 2025). Draft regulations are now in development, with the framework expected to come into force in 2027. If your business issues, distributes, or facilitates access to fiat-backed stablecoins in Canada, the compliance clock has started.
Key takeaways
- The Stablecoin Act creates Canada's first federal regime for fiat-backed stablecoin issuance by non-financial institutions.
- The Bank of Canada administers it; the framework is expected in force in 2027.
- It applies to issuers making stablecoins available to Canadians directly or indirectly — including foreign issuers.
- Issuers face a dual-layer reality: Stablecoin Act obligations to the Bank of Canada plus PCMLTFA/FINTRAC obligations as an MSB.
What is Canada's stablecoin framework?
For years, the issuance of fiat-backed stablecoins in Canada existed in a regulatory grey zone. Platforms traded them, users held them, businesses built payment products around them — yet no single federal regime governed the entities actually minting and issuing those coins. That changes with Canada's Stablecoin Framework.
Introduced through Budget 2025 and embedded in Bill C-15 (the Budget Implementation Act, 2025), the Stablecoin Act creates Canada's first comprehensive federal regime for the issuance of fiat-backed stablecoins by non-financial institutions. The legislation received Royal Assent, and the Department of Finance is now developing the supporting regulations, with the framework expected to come fully into force in 2027.
A fiat-backed stablecoin, for the purposes of this framework, is a digital asset designed to maintain a stable value pegged to a single fiat currency — such as the Canadian dollar or US dollar. This is distinct from algorithmic stablecoins, commodity-backed tokens, or crypto-collateralised assets, none of which fall under this regime. The framework is built around four policy objectives: enabling innovation and competition, protecting consumers, aligning with international standards, and safeguarding financial stability.
What triggered this? The global context
Canada did not develop its stablecoin framework in isolation. The regulatory momentum is global, driven by the recognition that stablecoins — particularly those with cross-border reach — pose systemic financial stability risks if left unregulated. Two major international developments directly shaped Canada's approach:
- The US GENIUS Act (August 2025) — established a federal licensing regime for stablecoin issuers. Canada's framework was designed with interoperability in mind, making future reciprocity between Canadian and US-registered issuers a stated policy goal.
- The EU's MiCA (fully in force, 2024) — brought e-money tokens and asset-referenced tokens under a comprehensive supervisory framework with reserve requirements, redemption rights, and CASP licensing. Canada's framework closely mirrors MiCA's reserve and redemption architecture.
- FSB Recommendations (2023) — the Financial Stability Board's high-level recommendations for global stablecoin arrangements cover governance, reserve composition, redemption, cross-border cooperation, and AML/CFT. Canada's framework is explicitly designed to be consistent with them. The FSB's core principle — "same activity, same risk, same regulation" — runs through the entire Canadian framework.
Who does the framework apply to?
The framework applies to non-financial institution issuers of fiat-backed stablecoins who make those stablecoins available to Canadians, directly or indirectly — regardless of where the issuer is incorporated.
In scope: fintechs that mint and issue CAD- or USD-pegged stablecoins; crypto companies operating stablecoin products distributed to Canadian users; foreign issuers whose coins are accessible by Canadians through any channel.
Out of scope: banks, credit unions and other regulated financial institutions (subject to their existing prudential frameworks); and non-fiat-backed stablecoins (algorithmic, commodity-backed, crypto-collateralised), which remain under provincial securities regulators.
One word deserves attention: "indirectly." The framework applies to issuers who make stablecoins available to Canadians directly or indirectly. It likely captures a foreign issuer whose coin is listed on a Canadian exchange or accessible through a Canadian wallet provider — even without a direct contractual relationship with Canadian end-users. If your stablecoin reaches Canadian users through any channel, do not assume you're outside scope.
A business could be subject to three parallel Canadian regimes: the Stablecoin Act (for issuance), the RPAA (for payment activities), and PCMLTFA/FINTRAC (for AML).
The Bank of Canada's new supervisory role
The Bank of Canada will administer the Stablecoin Act and supervise registered issuers — a deliberate choice. It already supervises PSPs under the RPAA and oversees systemically important payment systems, and stablecoin issuers fit logically within that ecosystem as payment-adjacent infrastructure. The Department of Finance retains responsibility for policy and regulatory development, with draft regulations published in the Canada Gazette for consultation.
Businesses already registered as PSPs under the RPAA who also issue stablecoins will need to manage two distinct Bank of Canada relationships — one under the RPAA and one under the Stablecoin Act — with separate registration obligations and compliance reporting.
Registration requirements
Non-financial institution issuers must apply for registration with the Bank of Canada before issuing fiat-backed stablecoins to Canadians. Registration is an ongoing obligation, not a one-time gate. The application must include corporate information (ownership, governance, financial health), technology information (blockchain infrastructure, smart contract architecture, stabilisation mechanisms), and compliance information.
After registration, issuers face continuous disclosure: updated information when significant changes occur, and compliance reports certified by a chartered accountant and supported by a legal opinion, submitted on an ongoing basis. You will not be able to self-certify compliance — budget for a qualified CA and a legal practitioner now.
💡 Pro tip. Start building your compliance documentation infrastructure now — before regulations are finalised. The registration application will require evidence of a functioning compliance programme, not a promise to build one. Treat 2026 as your build year and you'll be registration-ready.
Reserve requirements: the 1:1 rule
The reserve requirement is the structural heart of the framework. Issuers must maintain reserve assets equal to or greater in value than the total outstanding stablecoins. The requirements are precise:
- 1:1 minimum — the market value of reserve assets must meet or exceed the value of outstanding stablecoins at all times. Nominal face-value matching is insufficient if asset values have declined.
- Asset quality and currency — reserves held in cash or high-quality cash-like assets, denominated in the stablecoin's reference currency. A USD-pegged coin cannot satisfy reserves with CAD assets.
- Qualified custodian — reserves held at a qualified custodian (definition to be set in regulations).
- Segregation — reserve assets segregated from the issuer's own assets and from the custodian's assets.
- Insolvency protection — on the issuer's insolvency, reserve assets must not be accessible to general creditors; they are held exclusively for stablecoin holders.
This mirrors the FSB's Recommendation 9 and parallels MiCA's requirements for e-money token issuers. The segregation and insolvency-protection requirements need structured legal arrangements — trust arrangements or equivalent — designed, documented and maintained. This is compliance infrastructure, not treasury management.
Redemption obligations: what "at par" means
Every registered issuer must establish, publish, and follow a redemption policy specifying how holders redeem, the timing and manner, any fees, and the role of third parties. The key obligation is at-par redemption in the referenced fiat currency — a CAD-pegged coin must be redeemable at exactly CAD 1:1, with no discretion to redeem at a discount.
Redemption fees, if charged, must be transparently disclosed and must not be high enough to become a de facto deterrent to redemption. Policies must also account for stressed scenarios: holders must retain the ability to redeem directly with the issuer even if the distributing intermediary becomes unavailable — which has significant implications for issuer–distributor contracts.
Governance, risk and disclosure obligations
Beyond reserves and redemption, registered issuers must establish, publish and follow policies on corporate governance (clear accountability, board oversight, conflicts management), risk management (operational, financial, cyber and counterparty risks), data security, and recovery and resolution (orderly wind-down with continuity of holder rights). Users must have access to meaningful information about governance, reserve composition, the stabilisation mechanism, and redemption. Issuers must also provide the Bank of Canada or Minister of Finance any information requested — an open-ended supervisory power.
🔍 Industry insight. The FSB's 2023 recommendations identified governance failures — not reserve inadequacy alone — as a primary driver of systemic risk. Canada absorbed this directly: recovery and resolution plans, identifiable legal accountability for all functions, and governance that "allows for timely human intervention." If your architecture relies heavily on smart contracts or permissionless infrastructure, your governance documentation will require particular care.
AML/ATF obligations: the PCMLTFA layer
The Stablecoin Act is not a standalone compliance universe. Stablecoin issuers are classified as money services businesses dealing in virtual currencies under the PCMLTFA. Alongside the Stablecoin Act obligations, issuers must maintain:
- A fully compliant AML/ATF programme under PCMLTFA s.9.6 — written policies, a designated compliance officer, risk assessment, and training.
- FINTRAC registration as an MSB dealing in virtual currencies.
- Customer due diligence (KYC/CDD) and enhanced due diligence for higher-risk customers.
- Transaction reporting — STRs, LCTRs, and EFTRs where applicable.
- Record-keeping consistent with PCMLTFA, and compliance with the FATF Travel Rule for virtual asset transfers.
This dual-layer reality — Stablecoin Act obligations to the Bank of Canada plus PCMLTFA obligations to FINTRAC — is one of the most practically challenging aspects for founders. They are not the same regulator, legislation, or compliance programme: they are parallel, overlapping obligations that must both be maintained and both be subject to examination. See our AML programme and MSB registration services for the PCMLTFA layer.
What you cannot do: key prohibitions
- No yield or interest. Issuers are prohibited from offering interest or yield to holders — a structural prohibition, not a disclosure requirement. This aligns with MiCA's treatment of e-money tokens.
- No deposit or legal-tender misrepresentation. Issuers cannot represent their stablecoin as legal tender, a deposit, or insured under deposit insurance. No implying CDIC protection or Bank of Canada backing.
- No false or misleading information via specified terms, logos or symbols (to be defined in regulation).
- No algorithmic stabilisation. The 1:1 high-quality-liquid-asset reserve requirement functionally excludes algorithmic stablecoins — there is no registration pathway for them.
Enforcement: penalties and national security powers
The Bank of Canada has enforcement authority: compliance agreements for less severe violations, and administrative monetary penalties (amounts to be set in regulations). Separately, the Minister of Finance holds significant national security powers — refusing access to registration, prohibiting an issuer from issuing to Canadians, or imposing conditions where necessary for national security. These operate independently of the Bank's supervisory tools and, for foreign issuers especially, represent a meaningful market-access risk.
The timeline: 2025 to 2027
The Canada Gazette publication of draft regulations is a critical engagement window — the formal public consultation period where industry can comment. Engage early; the window won't be long, and the drafted rules are often close to the final outcome.
How Canada's framework compares to MiCA and GENIUS
The similarities are not coincidental — all three draw from the FSB's 2023 recommendations. For multi-jurisdictional operators, the compliance architecture that satisfies one framework will largely satisfy the others, with jurisdiction-specific variations. The key Canadian divergences: the breadth of national security powers, the CA-certified compliance report, and the reserve asset composition rules to be defined in regulation.
Action steps for compliance officers and founders
Immediate (Q2 2026): conduct a scoping assessment (does your product fall within the definition; does your distribution reach Canadians?); if a potential issuer, engage legal counsel and begin mapping governance obligations; review your FINTRAC/PCMLTFA registration status; monitor the Canada Gazette for draft regulations.
Short-term (Q3–Q4 2026): submit comments during the Canada Gazette consultation; begin designing your compliance programme architecture; engage a qualified CA to understand the reporting requirements; review your reserve approach and build relationships with qualified custodians.
Medium-term (pre-2027): build and test your redemption infrastructure (at-par redemption must be operational, not planned); complete your AML programme under PCMLTFA; prepare your registration application; conduct a full pre-registration compliance gap assessment against the finalised regulations.
ComplyFactor provides AML advisory, fractional MLRO services, AML compliance programme development, and independent AML audit for Canadian and international fintechs navigating exactly this transition.
Frequently asked questions
Does the Stablecoin Act apply to USDT or USDC if distributed to Canadians?
Are algorithmic stablecoins covered?
If we're already a PSP under the RPAA, do we need a separate Stablecoin Act registration?
What happens to our PCMLTFA/FINTRAC obligations when the Stablecoin Act comes into force?
Can a stablecoin issuer offer staking or yield rewards to holders?
What qualifies as a "qualified custodian" for reserve purposes?
If our stablecoin is only used in a closed ecosystem (e.g. a loyalty programme), does the framework apply?
ComplyFactor is a specialist AML and regulatory compliance advisory firm working exclusively with MSBs, PSPs, fintechs, and VASPs across Canada's FINTRAC, RPAA, and stablecoin frameworks. Our advisors hold CAMS certification and bring direct examination experience to every engagement.
