Canada Draft Stablecoin Rules Cap Redemption Fees at 1% and Ban Yield

These proposed rules mandate that issuers must maintain one-to-one reserves and provide swift redemption for stablecoin holders. Furthermore, the rules maintain the existing prohibition on paying interest to holders.

The draft, published in the Canada Gazette, requires that every coin be backed one-to-one by reserves consisting only of cash and government debt maturing in three months or less, alongside money market funds holding only such assets.

These reserves must be held by a Canadian custodian in segregated accounts inaccessible to creditors in case of issuer insolvency. Holders may redeem any amount within three business days, with fees capped at 1%.

Issuers are prohibited from offering interest for simply holding a coin; any arrangement enabling users to earn yield from holding the asset, including sharing issuer income, is considered an indirect payment.

“These prohibitions are intended to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments,” the official notice stated.

Issuers retain the ability to keep earnings generated by their reserves, provided those reserves remain at least equal to the outstanding coins. Additionally, issuers cannot market a coin as a bank deposit or claim government insurance.

The Bank of Canada will supervise issuers, and serious breaches could incur penalties up to C$10 million, with lesser violations potentially reaching C$1 million.

This regulatory development follows the Stablecoin Act becoming law on March 26, 2026, and aligns with international trends, such as the GENIUS Act signed in the United States on July 18, 2025, which also bars interest payments.

These measures signal a formal regulatory posture by Canadian institutions toward digital assets, mirroring global efforts by market participants to establish clearer frameworks around stablecoin operations.

Why it matters

These proposed regulations establish a clear regulatory framework for stablecoins in Canada, mirroring some restrictions seen in the U.S. GENIUS Act. The focus on reserve backing and redemption speed directly impacts user trust and operational risk for stablecoin issuers. Readers should watch to see how these rules compare to evolving international standards.