Canada tells banks to spin off stablecoin arms, and skip deposit insurance

> 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. Bank ownership would not turn a covered stablecoin into a publicly insured deposit.