Canada’s Draft Stablecoin Rules Cap Redemption Fees at 1% and Ban Yield
Canada has published draft regulations for stablecoins that would require one-to-one reserves with Canadian custodians, cap redemption fees at 1%, and ban paying interest to holders.
The draft regulations, published October 24 in the Canada Gazette, open a 60-day comment period. Issuers would be required to hold reserves equal to the value of all stablecoins issued, with these reserves limited to cash, government debt maturing in three months or less, and money market funds holding such assets.
Holders could redeem any amount within three business days, with fees capped at 1%. The rules explicitly prohibit issuers from paying interest for simply holding a coin or routing it through third parties that allow yield generation.
These prohibitions are intended to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments.
Consumer Protections
The regulations include several consumer protection measures. Issuers cannot present a coin as a bank deposit or claim deposit insurance or government guarantee. Complaints would need to be acknowledged within seven days and resolved within 30.
Reserves must be held in separate accounts with Canadian custodians that creditors cannot access if the issuer goes bankrupt. This ensures holders can get their money back even if the issuing company fails.
Enforcement Timeline
The Bank of Canada will register and supervise issuers, with penalties reaching up to C$10 million for very serious violations such as failing to hold adequate reserves or redeeming at par value. The notice assumes about five issuers and 30 payment companies would fall under this oversight.
Ottawa is accepting comments for 60 days, until approximately December 23. The regulations are intended to take effect in fall 2027, following the passage of the Stablecoin Act in March 2026.
The move reflects similar regulatory approaches in other jurisdictions. The U.S. GENIUS Act, signed in July 2025, also bars issuers from paying holders interest, though debates continue about yield allowances.
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