On September 8, 2026, the Canadian Web3 Council submitted its recommendations for Budget 2026. Our submission focuses on the regulations being developed under the Stablecoin Act and the role Canadian-dollar stablecoins can play in protecting Canada’s economic and monetary sovereignty.
Below is an overview of our submission and five recommendations.
Recommendation 1
That the Government adopt a coherent regulatory taxonomy for prescribed stablecoins across all laws.
Recommendation 2
That the Government adopt regulations under section 32 of the Stablecoin Act to narrow the prohibition on interest or yield.
Recommendation 3
That the Government establish coherent requirements for qualified custodians.
Recommendation 4
That the Government adopt equivalency requirements for foreign issuers and establish mutual reciprocity with key jurisdictions.
Recommendation 5
That the Government provide a 60-day comment period following prepublication of the regulations.
Stablecoins and Canada’s Monetary Sovereignty
CW3 supports the Government’s efforts to protect Canada’s economic sovereignty, strengthen key industries and position Canada for long-term growth. Integrating the Canadian dollar into global digital payment systems builds currency resilience, and stablecoins are part of the solution.
Parliament has passed the Stablecoin Act, and the Department of Finance and the Bank of Canada are developing the regulations that will bring it into force. These regulations will cover registration, reserves, redemption, custody and the treatment of foreign issuers.
Nearly all, or 99 per cent, of the approximately $311 billion in stablecoins in global circulation were denominated in U.S. dollars as of August 31, 2026. Four per cent of Canadian adults surveyed by the Financial Consumer Agency of Canada in September 2025 hold stablecoins, representing more than 1.5 million Canadians. The majority of those holdings are likely U.S.-dollar stablecoins.
Canadians holding U.S.-dollar stablecoins create demand for U.S. Treasuries. This erodes Canada’s monetary sovereignty and domestic capital markets.
Canada must shape requirements that make domestic tokenized money and payment systems interoperable with emerging global infrastructure while preserving control over the Canadian-dollar settlement layer.
Our Recommendations
Recommendation 1
Adopt a coherent regulatory taxonomy for prescribed stablecoins across all laws.
Ambiguities over whether stablecoins are payment instruments, securities or speculative commodities for tax purposes create regulatory uncertainty, operational friction and accounting and tax complexities that impede innovation and competition.
CW3 recommends clarifying their treatment under the Income Tax Act, Excise Tax Act, Payment Clearing and Settlement Act and Retail Payment Activities Act. Federal and provincial regulators must also work together to treat prescribed stablecoins consistently as payment instruments.
Recommendation 2
Adopt regulations under section 32 of the Stablecoin Act to narrow the prohibition on interest or yield.
The reference to indirect payment reaches beyond payments an issuer makes for holding a stablecoin and captures arrangements that have nothing to do with the policy concern. It also favours incumbent card networks, which routinely reward customers.
The regulations should confirm that third-party rewards based on usage or transaction volume fall outside the prohibition. Activity-based incentives, merchant acceptance rebates and loyalty programs should also be permitted.
Recommendation 3
Establish coherent requirements for qualified custodians.
Custody is a key pillar of consumer protection. To minimize concentration risk, Canada must build its domestic capacity for a robust and competitive custody ecosystem for stablecoin reserve assets, crypto asset funds and private keys.
As the Stablecoin Act stands, only financial institutions qualify as custodians unless the regulations say otherwise. Custody for Canadian stablecoins should not be concentrated among a handful of incumbent institutions, which would be contrary to the competitive domestic market the framework should support. The U.S. framework recognizes a wider range of custodians, including trust companies and registered broker-dealers.
Qualified custodians should include regulated Canadian financial institutions and trust companies. Custodians of private keys should meet applicable capital, operational-resilience, technology, risk-management and governance standards.
For stablecoins issued in Canada, CW3 recommends that reserve assets, cash and private keys be held in Canada, with foreign-issued stablecoins used by Canadians subject to mutual reciprocity arrangements. The submission also supports requiring reserve assets to be held in bankruptcy-remote, segregated accounts with qualified custodians for the benefit of holders.
The alternative to federal clarity is a provincial patchwork. Canada’s first Canadian-dollar stablecoin issued through a regulated financial institution was approved provincially in May 2026 because no federal pathway was yet in force.
Recommendation 4
Adopt equivalency requirements for foreign issuers and establish mutual reciprocity with key jurisdictions.
Section 14 of the Stablecoin Act allows the Governor of the Bank of Canada to exempt an issuer, or a class of issuers, where a foreign law is “substantially similar” to the act. What is missing is not authority but criteria.
The regulations should define what substantially similar means in practice and establish predictable requirements for foreign issuers entering Canada and Canadian issuers serving international markets.
CW3 believes concerns about foreign issuers’ ability to meet local redemption demands can be addressed through targeted regulations. These should cover foreign issuers holding sufficient reserve assets locally, the conditions for granting exemptions under reciprocal arrangements, foreign issuer accountability to local regulators and a coherent cross-border supervisory framework.
Recommendation 5
Provide a 60-day comment period following prepublication of the regulations.
Extensive industry consultation is warranted to resolve stablecoin design questions that carry implications for business models and future market structure.
While the standard comment period is 30 days, the Department provided 45 days for the proposed Retail Payment Activities Regulations, and the framework under the Stablecoin Act is broader. A longer consultation period would give industry participants sufficient time to evaluate the regulations and provide informed feedback. It would also allow for input on the federal-provincial jurisdictional boundary.
Conclusion
CW3’s five recommendations are directed at the regulations now being developed and aim to keep Canada competitive as the U.S., U.K. and European frameworks take effect over the coming year.
Canada has an opportunity to establish clear rules before global stablecoin markets become even more entrenched around the U.S. dollar. A coherent framework for classification, rewards, custody and foreign issuers, supported by meaningful consultation, would help Canadian businesses compete while protecting consumers and preserving the integrity of the financial system.
None of these recommendations require new spending. A trusted Canadian-dollar stablecoin could expand Canada’s share of global digital payments, boost productivity and demand for Government of Canada bonds, support trade diversification and reinforce economic sovereignty
About CW3
The Canadian Web3 Council (CW3) is a non-profit trade association advocating for forward-thinking public policy that enables the responsible growth of Web3 in Canada. Our members build blockchain, crypto asset, and digital payment technologies and serve users in more than 190 countries.
