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Through the Budget 2025 Implementation Act, Canada has seen its highly anticipated stablecoin legislation. Below are the highlights from the proposed Stablecoin Act (the "Act").
Key Features of the Draft Legislation
1. Regulatory Scope and Applicability
The Act applies to fiat-referenced stablecoins issued by non-prudentially regulated entities. It expressly excludes central bank digital currencies (CBDCs), regulated financial institutions, and closed-loop payment instruments (e.g., merchant-specific tokens). A public registry of approved issuers will be maintained by the Bank of Canada (the "Bank"), and only listed issuers may legally offer stablecoins in Canada.
2. Prudential Oversight and Registration
Prospective issuers must apply for registration with the Bank by submitting detailed public disclosures on reserve composition, redemption rights, custodial arrangements, governance, cybersecurity, risk management, and recovery and resolution planning. Ongoing compliance obligations apply post-registration.
The Bank will oversee administration and rulemaking, while the Minister of Finance retains authority to review applications for national security purposes and issue policy guidance and regulations.
The Minister is empowered to impose conditions, restrict, or prohibit issuance where risks to national security, monetary policy, or financial stability are identified. The Bank may not register an issuer without the Minister's clearance during the review period.
3. Reserve and Redemption Requirements and Yield Ban
Stablecoins must be fully backed by unencumbered, high-quality liquid assets denominated in the reference fiat currency. Reserves must be held with qualified custodians and kept bankruptcy remote. Issuers must also adopt and publish clear, enforceable redemption policies, including mechanics, timing, fees, and third-party roles.
Offering interest, yield, or any similar return is prohibited—distinguishing stablecoins from investment products.
4. Legal Opinions and Bankruptcy Protection
Issuers are required to provide and maintain legal opinions confirming that reserve assets are unencumbered and held in in a bankruptcy-remote structure—ensuring that customer redemptions are insulated from insolvency risks.
5. Interaction with Securities Laws
While the Act carves out a limited exemption under federal financial institution statutes to avoid stablecoin issuance being treated as securities dealing, it does not override provincial securities laws. Issuers must still consider compliance with existing CSA guidance, such as Staff Notice 21-333.
6. Amendments to the RPAA
The Retail Payment Activities Act (RPAA) is amended to expressly cover payment functions involving stablecoins. This will subject wallets, custodians, and other PSPs facilitating stablecoin transactions to operational oversight by the Bank of Canada, complementing the prudential regulation of stablecoin activities.
Implications
With the Stablecoin Act, Canada joins other leading jurisdictions—most notably the United States (via the GENIUS Act) and the European Union (under MiCA) — in developing tailored regulatory frameworks for fiat-backed stablecoins. As ever, the evolution of the federal–provincial interface, and in particular how provincial securities regulators will adapt to the Stablecoin Act, remains a critical area to monitor.
If your organization is considering issuing, partnering with, or servicing stablecoin-related offerings in Canada, McMillan LLP can assist—including with regulatory strategy, RPAA implementation, and legal opinions on compliance under the upcoming Stablecoin Act and related frameworks.
About McMillan Crypto
McMillan LLP has a comprehensive understanding of blockchain, cryptocurrency, digital assets and other decentralized technologies. We use an integrative, pragmatic, and proactive approach when providing counsel in connection with an ever-changing regulatory landscape. Our cross-disciplinary team brings together specialists across many fields, including litigation, securities regulation, capital markets, investment funds and asset management, mergers and acquisitions, derivatives, technology, privacy and cybersecurity, intellectual property, consumer protection, anti-money laundering, financial services, tax, and bankruptcy and insolvency.
About McMillan's Perspective
The foregoing is only an overview and does not constitute legal advice. Our team closely monitors legal, regulatory, and market developments in the digital asset space globally and remain committed to keeping our clients and audience informed about recent developments and reflecting on how such developments may influence Canadian legislative approaches and regulatory positions on digital assets and market structures. By staying ahead of digital innovation and domestic and cross-border policy shifts, McMillan supports clients in anticipating change, managing risk, and identifying new opportunities across the evolving digital economy.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
