Canada has opened a 60-day consultation on proposed stablecoin regulations that retain its ban on issuer-paid yield and require reserves to be held with qualified Canadian financial institutions.
Summary
- Canada’s stablecoin consultation runs until Dec. 23, covering reserve custody, redemption rights and issuer obligations.
- Issuers cannot pay yield on holdings, but transaction-based rewards remain permitted under the draft.
- Redemption fees would be capped at 1%, with fiat transfers initiated within three business days.
- Foreign non-financial issuers serving Canadians fall within the framework, regardless of their stablecoin’s reference currency.
The Department of Finance published the draft in the Canada Gazette on Oct. 24, with comments due Dec. 23, 2026.
Canada’s stablecoin proposal permits transaction rewards
The proposed regulations prohibit issuer-funded arrangements that reward larger holdings or longer holding periods, while allowing rewards tied only to transactions. The draft requires 1:1 backing, Canadian-domiciled custodians and redemption fees no higher than 1%.
Its three-business-day redemption deadline covers liquidating reserves and initiating the fiat transfer, according to the department’s explanation. No minimum redemption amount would apply.
The Canadian Web3 Council had called for a narrower yield prohibition in its Sept. 8 pre-budget submission, requesting explicit permission for usage-based incentives, merchant rebates and loyalty programs.
“The regulations should confirm that third-party rewards based on usage or transaction volume fall outside the prohibition,” the council wrote.
In the same submission, the industry group argued that restrictions on indirect payments could capture arrangements unrelated to the government’s policy concern. It said established card networks routinely offer customer rewards and sought rules that would permit comparable activity-based programs.
On custody, the council recommended segregated, bankruptcy-remote reserves and Canadian custody for domestically issued stablecoins. For foreign-issued tokens used by Canadians, it proposed reciprocity arrangements with other jurisdictions.
Foreign issuers fall within the Canadian framework
The Finance Department’s framework overview says the rules cover domestic and foreign non-financial issuers that make fiat-backed stablecoins available to Canadians, directly or indirectly. The department does not distinguish between tokens denominated in Canadian dollars and those referencing foreign currencies.
In its description of reserve protections, the department requires assets to remain separate from the property of both the issuer and custodian. If an issuer becomes insolvent, creditors other than stablecoin holders must not have access to those reserves.
The department’s registration requirements cover corporate ownership, financial health, the token’s technology and compliance with the Stablecoin Act. Continuing disclosures would include information certified by an accountant and supported by a legal opinion.
The Bank of Canada says its responsibilities will include registering issuers, supervising compliance, monitoring issuance and redemption risks, and taking enforcement action. Its published mandate focuses on full backing with high-quality liquid assets and redemption at par.
The central bank describes this work as an extension of its existing payments oversight. Finance leads the development of regulations, while the Bank supports that work and will administer the issuer framework. The Bank’s stablecoin page identifies publication of the proposed regulations in Part I of the Canada Gazette as the current regulatory step.
Canada’s 2025 stablecoin budget plan set aside C$10 million over two years starting in 2026 for administration, as crypto.news previously reported on Nov. 5, 2025. The budget anticipated C$5 million in annual costs to be recovered from regulated issuers.
US stablecoin rules start in January
Across the border, the Office of the Comptroller of the Currency has completed its GENIUS Act rule, setting Jan. 18, 2027, as the effective date. Its bulletin covers reserve assets, redemption, risk management, custody, capital, applications, and supervision.
The final rule retains the statutory ban on issuer-paid interest or yield solely connected with holding, using or retaining a payment stablecoin. In its discussion of rewards, the OCC removed a proposed rebuttable presumption governing certain third-party arrangements.
The regulator says transaction-based payments require examination of their specific terms. Payments that do not constitute interest or yield, or are not made solely in connection with holding, using or retaining the token, would not be prohibited.
Existing rewards programs receive no automatic exemption in the final text. The OCC declined to assume that programs predating the law comply with it.
The agency’s issuer approval and waiver process, covered on Oct. 22, permits eligible applicants with substantially complete applications pending to request written relief. The waiver can last no more than 12 months beginning Jan. 18.
The OCC bulletin leaves Bank Secrecy Act, anti-money-laundering and sanctions provisions to a separate rulemaking coordinated with Treasury.
Canadian banks pursue tokenized deposits
Canadian lenders are developing digital payment products alongside the stablecoin framework. A Sept. 22 account of their shared tokenized deposit project identified Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank as participants.
Their announced first phase focuses on transfers of tokenized Canadian-dollar deposits between participating financial institutions. The banks said connections with other digital asset programs would follow later work, without providing a commercial launch timetable.
Each tokenized deposit remains a liability of its issuing bank, representing money already held there. Canada’s Office of the Superintendent of Financial Institutions has said digitizing a deposit does not change its legal character.
A separate Canadian-dollar stablecoin, CADD, gained Anchorage Digital institutional custody on May 22. Tetra Digital Group said institutions could hold the token with the US federally chartered crypto bank.
CADD is backed one-to-one by Canadian dollars held at a licensed Canadian trust company and received approval from Alberta regulators, according to the May announcement.
