Canada seeks feedback on draft stablecoin regulations, continues to prohibit issuers from paying interest

October 26: Canada's Department of Finance has launched a 60-day public consultation on draft stablecoin regulations, with a deadline of December 23. The draft continues to prohibit stablecoin issuers from paying interest to holders directly or through third parties, but allows rewards tied to trading activity.

According to the draft, non-bank stablecoin issuers must support circulating fiat-pegged stablecoins 1:1 with equivalent reserve assets and hold reserves at eligible Canadian financial institutions, including banks, credit unions, and trust companies. User redemption of stablecoins should be completed within 3 business days, with redemption fees not exceeding 1%.

Canada has previously passed the Stablecoin Act, and these regulatory details are intended to clarify the requirements issuers must meet to register with the Bank of Canada. The relevant framework is expected to take effect around the end of 2027.

The draft comes as Canada's banking sector is pushing to ban yield payments on stablecoins to prevent funds from flowing from traditional bank deposits into stablecoins. At the same time, some Canadian crypto platforms have been permitted to offer yield to eligible stablecoin holders.