- Canada’s Department of Finance has published draft Stablecoin Regulations, with full one-to-one reserves held at Canadian custodians, redemption within three business days, and redemption fees capped at 1%.
- Issuers would be barred from paying interest or yield for simply holding a token, directly or through revenue-sharing with a third party. Rewards for using a stablecoin would still be allowed.
- These are proposals out for comment, not binding rules. Nobody has to comply with any of them yet.
Ottawa has put a price on redeeming a stablecoin, a deadline on getting your money back, and a flat prohibition on earning anything for holding one. The draft rules landed in the Canada Gazette on 24 October, and none of them bind anyone today.
If you hold USDC or USDT and you’ve seen a platform advertising a return on that balance, this is the regulatory argument against it, written out. Canada’s position is the same one the United States took and the one the Bank of England has been circling: a token that pays you for holding it is behaving like a bank deposit, and it doesn’t come with any of the things that make a bank deposit safe. The yield is real. The compensation scheme behind it isn’t.
What the draft actually says
The Department of Finance published the proposed Regulations under the Stablecoin Act, which received royal assent in March 2026 but is not yet in force. The Regulations are, in the department’s own words, “required to bring the SCA into force and would prescribe the elements needed for issuers to register with the Bank of Canada”. That registration regime does not operate yet.
Issuers would have to hold reserve assets worth at least the par value of every token outstanding, in high-quality liquid assets, with a Canadian-incorporated qualified custodian. That category could cover domestic banks, Canadian-incorporated foreign banks, credit unions, trust companies and insurers.
Redemption is where the draft gets specific. A holder asking for their money back must be paid within three business days, there is no minimum redemption amount, and the fee for redeeming is capped at 1% of the sum redeemed, a provision Decrypt has since singled out as one of the draft’s central conditions. Issuers would need to give at least seven days’ notice before putting fees up.
That fee cap is doing unglamorous but useful work. The failure mode it guards against isn’t an issuer refusing to redeem, it’s an issuer making redemption expensive enough that most people don’t bother, which lets a token quietly trade below the thing it’s supposed to be worth. Cap the exit cost and the peg has something holding it up besides goodwill.
Worth saying plainly: a written obligation to redeem in three business days is a rule about what an issuer’s systems must be capable of. It is not evidence that any issuer has demonstrated it under pressure, which is the only condition that ever matters.
The yield ban, and who wants it
The prohibition covers interest or yield tied to holding a stablecoin, whether paid directly or arranged indirectly through income-sharing with a third party. Payments tied to using a stablecoin would still be permitted, which the department frames as encouraging adoption.
The reasoning is the same everywhere this has come up. Once an issuer pays you to park money with it, the token functions as a deposit that earns a return, and the issuer is running a bank’s business model without deposit insurance, capital requirements or a supervisor standing behind it. Canada’s own banking regulator made the related point about deposits in a September statement, describing them as “not legally distinct from traditional deposits”.
The Canadian Bankers Association told reporters it “firmly supports the Stablecoin Act’s explicit prohibition on yield, both direct and indirect”. That is an accurate account of the banks’ position and also an interested one: an interest-paying stablecoin is a direct competitor for the deposits that fund bank lending. Both things can be true at once.
Note also what the framework doesn’t reach. The Regulatory Impact Analysis Statement says the regime applies to issuers that are not prudentially regulated financial institutions, and “it would not regulate banks; trust, loan or insurance companies; credit unions; or foreign financial institutions”. So the yield ban sits on non-bank issuers. Banks are governed separately.
How it compares
The shape will look familiar to anyone who followed the US GENIUS Act, which also requires full reserves in high-quality liquid assets and also bars issuers from paying interest to holders. The UK has been working along similar lines, with the Bank of England and the FCA consulting on a sterling stablecoin regime built around backing assets and a guaranteed right to redeem at par.
Three large jurisdictions have now independently arrived at the same two conditions: back it fully, and don’t pay people to hold it. If you’re a UK reader wondering why no regulated platform here offers a return on a stablecoin balance while some offshore ones advertise several per cent, that’s the answer. The offers that exist operate outside this consensus rather than within it.
What isn’t settled
CoinDesk reports the consultation runs 60 days and closes on 23 December, with the framework expected to take effect toward the end of 2027. The late-2027 date reads as an expectation rather than a fixed legal commencement, and it did not appear in the portion of the Gazette notice we could retrieve.
There are also existing Canadian arrangements that sit awkwardly beside the draft. Coinbase’s Canadian arm was given Ontario Securities Commission permission to offer yield on eligible stablecoin holdings subject to risk disclosures, according to CoinDesk. That is a provincial securities arrangement predating this federal draft, and nothing published so far explains how it survives contact with a federal yield ban, if it does. Our Coinbase review covers the UK side of the business; the Canadian permission is a separate matter.
Separately, Canada’s six largest banks are reported to be exploring a Canadian-dollar tokenised interbank system. Exploring. Some coverage has reached for the word launch, which is a different stage entirely.
What to watch
Whether the yield prohibition survives the comment period intact. Non-bank issuers have an obvious reason to push back on a rule their bank competitors publicly endorse, and consultations exist to be argued with.
The 1% redemption fee cap is the other number to keep an eye on. It is the kind of figure that tends to get argued over in a consultation precisely because it is a single digit in a draft rather than a principle, and an issuer with thin margins on small redemptions has a case to make.
After that, the Bank of Canada registration regime. Until it is operating, the Stablecoin Act is a law that has been passed rather than a law that applies, and anyone describing Canada as having stablecoin rules is describing an intention. For more on how this fits the wider rulemaking picture, see our policy coverage.