Canada has published draft rules for companies that issue stablecoins, setting strict limits on the reserves backing the tokens, the terms under which holders can redeem them, and the fees issuers may charge. The proposal appeared in the Canada Gazette, the government's official newspaper, on October 24, and it preserves a ban on paying holders interest, commonly known as yield. Ottawa has opened a 60-day comment period before the rules are finalized.

The draft also outlines how the Bank of Canada would supervise compliance, the penalties issuers could face, and a timeline that would see the regime take effect in fall 2027.

Stablecoins are crypto tokens built to hold a steady value, most commonly one U.S. dollar.

One-to-One Reserves and Three-Day Redemptions

Under the draft framework, every stablecoin would need to be backed one-to-one by reserves. Eligible reserve assets are limited to cash, government debt maturing in three months or less, and money market funds that hold only those types of assets. The reserves would have to be held by a Canadian custodian in separate accounts, and creditors could not reach that money if the issuer went bankrupt.

Holders would be able to redeem any amount of their coins within three business days, and redemption fees would be capped at 1%.

Yield Ban Leaves Room for Usage-Based Rewards

Issuers could not pay interest to people for simply holding a coin. They also could not route interest through third parties, including by sharing the issuer's own income. Rewards tied to using a coin, rather than passively holding it, would still be permitted. Issuers could keep the income their reserves generate, provided reserves remain at least equal to the coins in circulation.

"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.

The draft also constrains how issuers may describe their products. A stablecoin could not be marketed as a bank deposit, and issuers could not claim that coins carry deposit insurance or a government guarantee.

Complaint handling standards are part of the package as well. Customer complaints would need to be acknowledged within seven days and resolved within 30 days.

Bank of Canada Oversight and Penalties

The legislation behind the proposal, the Stablecoin Act, became law on March 26, 2026, after Ottawa announced its plan in the November budget. Under the regime, the Bank of Canada, the country's central bank, will register and supervise stablecoin issuers.

Penalties would reach C$1 million for serious violations. Very serious violations — such as failing to hold sufficient reserves or redeem coins at full value — could bring fines of up to C$10 million.

The notice projects that five issuers would fall under the rules, while roughly 30 additional payment companies, including crypto platforms that hold customers' coins in wallets, would also come under Bank of Canada oversight.

Comparison With the U.S. Stablecoin Regime

The Canadian framework shares a central feature with U.S. law. President Donald Trump signed the GENIUS Act, the U.S. federal stablecoin law, on July 18, 2025, and that statute likewise bars stablecoin issuers from paying holders interest.

Since the U.S. law passed, debate in Washington has centered on whether crypto platforms can offer yield to their users. Banks oppose the practice, warning that deposits could migrate toward crypto. The dispute contributed to the failure of the Clarity Act in the Senate. Banking groups said the bill failed to close what they described as a loophole allowing platforms such as Coinbase to offer yield on USDC, a major U.S. dollar stablecoin, held in customer accounts.

Comment Period and Timeline

Ottawa is accepting public comments until roughly December 23. Feedback received during that window will inform the final text. The government said it intends for the final rules to take effect in fall 2027.

Source: Blockonomi