Canada proposed stablecoin regulations on October 24 that would require companies issuing stablecoins—crypto tokens designed to maintain a steady value—to keep real money in reserve and allow holders to redeem their coins on demand.
The draft regulations, published in the Canada Gazette, open a 60-day comment period and are targeted to take effect in fall 2027. The rules establish reserve requirements, redemption timelines, fee limits, and prohibit paying interest to coin holders.
Reserve and Redemption Requirements
Each stablecoin must be backed one-to-one by reserves held with a Canadian custodian. Permitted reserve assets include cash and government debt maturing in three months or less, as well as money market funds holding only such assets. These reserves must be kept in separate accounts that creditors cannot access if the issuer becomes insolvent.
Coin holders may redeem any amount within three business days, with redemption fees capped at 1%.
Yield Prohibition
The regulations ban issuers from paying interest for simply holding a stablecoin, including indirect arrangements where holders earn yield through third parties or by sharing the issuer's income. However, rewards tied to using a coin rather than holding it would remain permitted.
According to the notice, these prohibitions aim to distinguish stablecoins from financial products that compete directly with bank deposits or other interest-bearing instruments. Issuers may retain earnings from their reserves as long as reserves remain equal to outstanding coins.
Additional Restrictions and Oversight
Issuers cannot present coins as bank deposits or claim deposit insurance or government guarantees. Companies must acknowledge complaints within seven days and resolve them within 30 days.
The Bank of Canada will register and supervise issuers. Penalties range from 1 million Canadian dollars for serious violations to 10 million Canadian dollars for very serious violations, such as failing to hold adequate reserves or failing to redeem at par value.
The regulations assume approximately five stablecoin issuers and about 30 payment companies, including crypto platforms that hold customer coins in wallets, would fall under Bank of Canada oversight.
Timeline and Context
The Stablecoin Act became law on March 26, 2026, following Ottawa's announcement in its November budget. The 60-day comment period closes on approximately December 23.
