Key Points
- On October 24, Canada released proposed stablecoin regulations mandating full reserve backing held by Canadian custodians.
- Redemptions must be processed within three business days, with maximum fees of 1%.
- Interest payments to coin holders are prohibited, though usage-based incentives remain permissible.
- The Bank of Canada will oversee issuers, with potential fines reaching C$10 million for severe infractions.
- The consultation period runs until approximately December 23, with implementation scheduled for fall 2027.
Canadian authorities have unveiled proposed regulations governing stablecoin issuance, establishing comprehensive requirements for reserves, redemption processes, and fee structures.
Stablecoins are cryptocurrency tokens designed to maintain a consistent value, typically pegged to one U.S. dollar. The proposed framework appeared on October 24 in the Canada Gazette, the official government publication.
The regulations maintain restrictions on interest payments to holders, commonly referred to as yield. The government has initiated a 60-day consultation window before finalizing the framework.
Core Requirements of the Proposed Framework
Each stablecoin must maintain full one-to-one reserve backing. Acceptable reserve assets include cash, government securities with maturities of three months or shorter, and money market funds invested exclusively in these instruments.
Canadian custodians must hold reserves in segregated accounts. These funds would be protected from creditor claims in the event of issuer insolvency.
Coin holders must be able to redeem any quantity within three business days. Redemption charges cannot exceed 1%.
Issuers are prohibited from distributing interest to individuals merely for possessing coins. They also cannot channel interest through intermediaries, including by distributing the issuer’s earnings.
Incentives linked to coin usage, rather than passive holding, remain permitted. Issuers may retain earnings from their reserves, provided reserve levels never fall below the total coins outstanding.
“These prohibitions are intended to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments,” the government notice says.
Issuers cannot characterize coins as bank deposits. They are also barred from suggesting deposit insurance coverage or government backing.
Customer grievances must be acknowledged within seven days and resolved within 30 days.
Supervision, Enforcement and International Context
The Stablecoin Act received royal assent on March 26, 2026, following its announcement in the November budget. The Bank of Canada will handle registration and supervision of issuers.
Serious violations carry penalties up to C$1 million. The most severe infractions, including inadequate reserve holdings or failure to honor full-value redemptions, may trigger fines as high as C$10 million.
Authorities anticipate approximately five issuers will operate under this framework. An additional 30 payment service providers, including cryptocurrency exchanges that custody client coins in wallets, will also fall under Bank of Canada supervision.
Across the border, President Donald Trump enacted the GENIUS Act on July 18, 2025. That legislation similarly prohibits stablecoin issuers from distributing interest to holders.
Subsequent American policy discussions have centered on whether cryptocurrency platforms can provide yield to users. Traditional banks have resisted this, expressing concerns about deposit migration toward digital assets.
This disagreement contributed to the Senate’s rejection of the Clarity Act. Financial institutions argued the legislation failed to address what they characterized as a regulatory gap permitting platforms like Coinbase to offer yield on USDC balances in customer accounts.
Canada is collecting public feedback until approximately December 23. Officials indicated the regulations are targeted for implementation in fall 2027.
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