Canada's proposed stablecoin rules would bar issuers from paying yield, even via third parties, and cap redemption fees at 1%, with comments due Dec. 23.
Key Facts
Canada's Department of Finance proposed Stablecoin Regulations, published in the Canada Gazette on Oct. 24, opening a 60-day consultation that runs until Dec. 23.
The draft rules would clarify the Stablecoin Act's ban on paying interest or yield tied to holding a stablecoin and extend it to arrangements with third parties, including income-sharing deals.
Issuers would have to redeem stablecoins at par within three business days with no minimum amount, and redemption fees would be capped at 1%.
Canada has published draft rules for stablecoin issuers that would spell out a ban on paying interest or yield on holdings, extend it to arrangements with third parties and cap redemption fees at 1%.
The proposed Stablecoin Regulations, sponsored by the Department of Finance and published in the Canada Gazette on Saturday, are needed to bring into force the country's Stablecoin Act, which covers stablecoins tied to a fiat currency. Issuers would register with the Bank of Canada, which would promote compliance with the rules.
Issuers would be barred from arrangements with any party that offer "interest or yield in ways that encourage stablecoin holders to hold more of the issuer's stablecoin, or to hold it for a longer period of time," according to a government analysis published with the draft.
The yield prohibition as described in the government's analysis of Canada's proposed Stablecoin Regulations, published Oct. 24. Source: Canada Gazette
Canada Moves to Close Third-Party Yield Routes
The ban covers income-sharing deals, for example "where one party's cost of offering interest or yield is funded by the issuer," the analysis says. Rewards tied only to using a stablecoin, rather than holding it, would still be allowed.
The government said the prohibitions are meant to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments.
In the US, the American Bankers Association said this month that the OCC's stablecoin rule leaves room for yield via exchanges.
Redemption Rules and Reserve Requirements
Issuers would have to redeem stablecoins one-to-one in the reference currency within three business days of a request, with no minimum redemption amount.
Redemption fees would be capped at 1% of the amount redeemed. The analysis said the market has trended toward redemption fees topping out at around 0.1%, but a cap at that level "could be overly restrictive for emerging or smaller-scale issuers."
Reserves would be limited to cash, government debt maturing within three months, one-business-day reverse repurchase agreements and money market funds made up entirely of eligible assets.
Issuers already operating when the act takes effect would have 30 days to apply for registration with the Bank of Canada. The Stablecoin Act received royal assent in March 2026, and the consultation runs until Dec. 23.
Payment service providers that perform payment functions using stablecoins would also fall under Canada's Retail Payment Activities Act. Elsewhere, HSBC launched its RedCoin stablecoin for PayMe users last week.
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