Canada Opens 60-Day Consultation on Draft Stablecoin Rules

Canada's Department of Finance published draft stablecoin regulations in the Canada Gazette on October 24, opening a 60-day public consultation that runs until roughly December 23. The proposed Stablecoin Regulations would bring the Stablecoin Act, which received royal assent in March 2026, into force and prescribe how issuers register with the Bank of Canada and hold reserves.

Under the draft rules, every coin must be backed one-to-one by reserves in the reference currency, held at a qualified custodian incorporated in Canada and kept in bankruptcy-remote segregated accounts. Permitted reserve assets are limited to cash and demand deposits, government debt maturing in three months or less, one-business-day reverse repurchase agreements, and money market funds composed entirely of those eligible assets. Issuers may withdraw returns generated by the reserves only while the reserve value stays at least equal to outstanding coins.

Holders could redeem any amount within three business days of a request, with no minimum redemption size and fees capped at 1% of the redeemed amount. The three-day window is set to accommodate Canadian T+1 and foreign T+2 securities settlement cycles plus operational processing time, according to the regulatory impact statement. Issuers must disclose all purchase and redemption fees and give holders at least seven days' website notice before any fee increase takes effect.

The draft keeps the statutory ban on paying interest or yield for holding a stablecoin, whether directly or through third-party income-sharing arrangements. Rewards tied to using a coin rather than holding one would remain permitted. "These prohibitions are intended to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments," the Gazette notice states.

Issuers also could not present a coin as legal tender, a bank deposit, or as insured under a public deposit insurance system. Complaints would need acknowledgment within seven days and resolution within 30.

The Bank of Canada would register and supervise non-bank issuers. Administrative monetary penalties would run up to C$1 million for serious violations and C$10 million for very serious ones, such as failing to maintain adequate reserves or redeem at par value. Decrypt reported that the notice assumes roughly five issuers and about 30 payment companies, including crypto platforms that hold customer coins in wallets, would fall under Bank of Canada oversight.

The framework is aimed at issuers that are not prudentially regulated financial institutions; the Stablecoin Act does not apply to banks, trust or loan companies, credit unions, or foreign financial institutions issuing stablecoins. Existing issuers would get transitional relief from pre-issuance registration provided they file an application within 30 days of the Act coming into force.

The draft mirrors a comparable U.S. limit. In the United States, President Donald Trump signed the GENIUS Act, the U.S. stablecoin law, on July 18, 2025, and that statute also bars issuers from paying holders interest, Decrypt reported. The fight there has centered on whether crypto platforms may offer yield to users, which banks oppose on the grounds that deposits could drain toward crypto. That dispute helped sink the Clarity Act in the U.S. Senate, separate legislation meant to set broader market rules, after the banking lobby argued it left a GENIUS Act loophole open for platforms such as Coinbase to pay customers yield on USDC balances.

CoinDesk noted that the Canadian Bankers Association has pressed for the yield ban, with a spokesperson telling The Logic in June that the group "firmly supports the Stablecoin Act's explicit prohibition on yield, both direct and indirect." Some Canadian exchanges already pay rewards: Coinbase Canada received Ontario Securities Commission permission this year to offer yields on eligible tokens with risk warnings and deposit-insurance disclaimers.

The proposed regulations would come into force alongside the Stablecoin Act on a day fixed by order of the Governor in Council. "The intention is for the proposed Regulations to come into force in fall 2027," the notice says. Written comments are being accepted through the 60-day window closing around December 23.