Canada Opens 60-Day Stablecoin Consultation and Keeps Yield Ban
Canada has opened a 60-day public consultation on draft stablecoin regulations that would keep a ban on yield payments, require one-to-one reserve backing, and require non-bank issuers to register with the Bank of Canada.
The Department of Finance Canada published the draft regulations in the Canada Gazette, Part I, on 24 October 2026. Comments are due by 23 December 2026. The rules are drafts for consultation, not rules already in force, and they are intended to bring Canada's Stablecoin Act into force.
What the Draft Rules Would Require
Under the draft framework, non-bank issuers of fiat-backed stablecoins would need to register with the Bank of Canada before issuing stablecoins. They would need to hold reserves equal to the value of their circulating tokens.
Those reserves would need to be held with qualified Canadian financial institutions, including banks, credit unions and trust companies. Reports describe the eligible reserve assets as highly liquid assets such as demand deposits, short-term government debt, certain money market funds and short-term repurchase arrangements.
Issuers would also need policies for redemption, risk management, data security and corporate governance, and would need to disclose reserve information and submit monthly reports to the Bank of Canada.
Redemption in Three Business Days, Fees Capped at 1%
A central protection in the draft is redemption. Holders would have the right to redeem stablecoins at face value in the underlying currency, with issuers required to initiate payment within three business days of a redemption request.
Redemption fees would be capped at 1% of the value being redeemed, and issuers could not impose a minimum redemption amount. That is intended to keep redemption available to small retail holders as well as institutions.
The draft also proposes administrative monetary penalties of up to C$1,000,000 for serious violations and C$10,000,000 for very serious violations.
Why the Yield Ban Matters
The draft maintains the Stablecoin Act's prohibition on issuers paying interest or yield simply for holding stablecoins, including through third parties. Rewards linked to transactions could still be allowed, but yield designed to encourage holding would not.
Canada's banking industry has pressed for the ban, arguing that yield-bearing stablecoins could pull money out of bank accounts and reduce lending. The Canadian Bankers Association has said it firmly supports the prohibition on yield, both direct and indirect.
The issue is already live in Canada. Coinbase Canada received permission from the Ontario Securities Commission this year to offer yields on eligible tokens, provided it warned customers about risks and made clear the funds are not covered by deposit insurance. The federal draft would set a different, stricter baseline for issuers.
No Government Guarantee
The proposed rules also seek to prevent issuers from misleading customers into believing stablecoins are government-guaranteed or covered by public deposit insurance. Reserve requirements and redemption obligations are protections, but they are not the same as deposit insurance.
The framework would generally apply to domestic and foreign non-bank issuers engaged in stablecoin issuance in Canada, while excluding prudentially regulated financial institutions such as banks and credit unions.
When Could the Rules Take Effect?
The government intends for the regulations to come into force alongside the Stablecoin Act in fall 2027, subject to the required implementation process. Transitional provisions are proposed for existing issuers that submit applications within 30 days of the legislation taking effect.
The timing also aligns Canada with a wider regulatory shift. The US GENIUS Act is set to take effect in January 2027, while the EU's MiCA framework is already reshaping which stablecoins and exchanges can operate in Europe.
What to Watch
Comments submitted by 23 December 2026, and whether the yield ban changes; how the Bank of Canada's registration guidance develops after final rules; whether existing Canadian stablecoin reward products need to change; how foreign issuers serving Canadian users respond to registration.
FAQs
When does Canada's stablecoin consultation close? 23 December 2026, 60 days after publication on 24 October 2026.
Would Canadian stablecoin issuers have to register? Yes, under the draft, non-bank issuers would need to register with the Bank of Canada.
Can stablecoin issuers pay yield in Canada under the draft? No. The draft maintains a ban on interest or yield paid simply for holding stablecoins.
How fast would redemption have to happen? Issuers would need to initiate payment within three business days, with fees capped at 1%.
When would the rules take effect? The government intends fall 2027, alongside the Stablecoin Act.
