Canada opens 60-day consultation on draft stablecoin rules, keeps ban on issuer yield

The Canadian government has launched a 60-day public consultation on draft regulations for stablecoins. The consultation runs until Dec. 23. According to the government, the draft rules are needed to bring the Stablecoin Act into force and would set out what issuers must provide to register with the Bank of Canada. The act itself was passed earlier this year.

A central feature of the proposals is the continued ban on yield. Issuers would not be allowed to pay interest to encourage customers to hold their tokens, and that restriction would extend to payments made through third parties. Rewards tied to transactions would still be permitted.

The yield question has drawn attention from the banking sector. The Canadian Bankers Association has said it firmly supports the act's explicit prohibition on yield, both direct and indirect, a position its spokesperson Natalle Begeron gave to The Logic in June. The concerns echo those raised in the United States, where banks worry that customers could shift money out of deposit accounts, leaving institutions with less capacity to lend.

Market practice in Canada is not uniform, however. Some crypto exchanges already pay rewards to stablecoin holders. Coinbase Canada obtained permission from the Ontario Securities Commission this year to offer yields on eligible tokens, on condition that it warned customers about the risks and made clear that the funds are not covered by deposit insurance.

On reserves, non-bank issuers would have to hold assets equal to the value of their fiat-pegged tokens in circulation. Those reserves would need to be placed with qualified Canadian financial institutions, including banks, credit unions and trust companies. Holders would have to be able to redeem their stablecoins for regular currency within three business days, with redemption fees limited to 1%.

The framework is expected to take effect toward the end of 2027. Other developments in the country include an announcement late last month that Canada's six largest banks are exploring a Canadian-dollar tokenized system for faster money movement between traditional institutions. That followed a Sept. 10 statement from the Office of the Superintendent of Financial Institutions that tokenized deposits are not legally distinct from traditional deposits. In May, Tetra Trust Company, the country's first regulated digital asset custodian, launched CADD, a Canadian-dollar stablecoin approved by Alberta Treasury Board and Finance.