Canada opens a 60 day consultation on stablecoin rules that keep the yield ban, require full reserves in Canada, and cap redemption fees at 1 percent

What happened

Canada has published the draft rules that would turn its stablecoin law into a working regime, and opened them to public comment. The Department of Finance launched a 60 day consultation on draft stablecoin regulations, CoinDesk reported on Monday, with the consultation ending on December 23. The government passed the Stablecoin Act earlier this year, and the draft regulations are, in the government's own words, required to bring the Act into force and would prescribe the elements needed for issuers to register with the Bank of Canada.

The draft's central decision is the one the banking industry asked for: yield stays banned. The proposals would prohibit stablecoin issuers from paying interest, including through third parties, to encourage customers to hold their tokens. What remains allowed is rewards linked to transactions, payments for using a coin rather than for holding it. A spokesperson for the Canadian Bankers Association, quoted in the coverage, said the group firmly supports the Stablecoin Act's explicit prohibition on yield, both direct and indirect. The consultation arrives as the banking industry presses that case, echoing concerns voiced in the United States that customers could move money out of bank accounts and leave traditional institutions with less to lend.

The reserve and redemption terms are specific. Non bank issuers would have to hold reserves equal to the value of their circulating fiat pegged tokens, and place those reserves with qualified Canadian financial institutions, including banks, credit unions and trust companies. Customers would have to be able to exchange their stablecoins for regular currency within three business days, with redemption fees capped at 1 percent. The framework is expected to come into effect toward the end of 2027.

The draft lands in a market that is already moving on both sides of the line it draws. Some crypto exchanges in Canada are already paying rewards to stablecoin holders, CoinDesk reported: one large exchange's Canadian arm received permission from the Ontario Securities Commission this year to offer yields on eligible tokens, provided it warned customers about the risks and made clear the funds are not covered by deposit insurance. Late last month, Canada's six largest banks said they were exploring a Canadian dollar tokenized system to move money faster among traditional financial institutions, and on September 10 the federal banking regulator stated that tokenized deposits are not legally distinct from traditional deposits. In May, a Canadian regulated digital asset custodian rolled out a Canadian dollar stablecoin approved by Alberta's finance authorities. The consultation is therefore not happening in an empty field: bank tokenized deposits, a provincially approved dollar coin, and exchange reward programs all exist before the federal issuer regime starts.

Why it matters

Canada's draft is the second major stablecoin rulebook to take shape this month, after the United States regulator finalized its GENIUS Act rule on October 21, and the two frameworks agree on the question that decides the product's economics. In both countries, a regulated stablecoin is to be a payment instrument backed one to one by reserves, not a savings product that pays its holder. The United States rule, covered in Thursday's package, bans issuers paying yield directly and judges third party rewards case by case. Canada's draft goes one step further in wording: paying through third parties is expressly inside the ban when the payment is meant to encourage holding. Transaction rewards survive in both systems. The line both regulators are drawing is the same line, between paying people to hold a coin, which competes with bank deposits, and paying people when they spend one, which competes with card rewards.

That comparison matters for issuers operating in both countries, which is most large ones. A rewards program structured to pass case by case review in the United States could still fail the Canadian test if its purpose is to reward holding, because the Canadian draft names the third party route directly. Conversely, the Canadian framework offers something the United States process currently does not: a consultation document with redemption terms stated as numbers, three business days and a 1 percent fee cap, that issuers can plan against more than a year before the regime starts at the end of 2027. The United States regime starts January 18, 2027, with its application window still unopened; Canada's starts later and consults earlier. The two timelines will run in parallel through 2027, and issuers will be complying with the American rulebook while commenting on the Canadian one.

The domestic tension in the draft deserves attention, because it is visible inside the reporting itself. A federal framework that bans issuer paid yield, including through third parties, sits alongside an existing provincial permission under which an exchange already offers yields on eligible tokens with risk warnings. Those are different legal routes, an issuer rule against a platform permission, and the draft as reported does not say how existing reward programs will be treated when the Act comes into force. Holders earning rewards in Canada today should not assume from this consultation either that the programs are ending or that they are safe; that question is one of the things a 60 day consultation exists to surface, and the December 23 deadline is when it will be argued on the record.

Registration with the Bank of Canada is the draft's other structural choice. The central bank becomes the gatekeeper for non bank issuers, while reserves must sit with qualified domestic financial institutions. That design keeps the backing assets inside the regulated Canadian system and gives the supervisor a register of who is issuing into the country, rather than relying on provincial securities routes alone. For foreign issuers serving Canadians, the practical consequence, consistent with the framework's purpose, is that access to the Canadian market runs through a federal registration and domestic reserve custody, not through a licence obtained elsewhere.

What to watch

Watch the consultation responses, which are due by December 23. The yield question will draw the banking industry on one side and exchanges and issuers on the other, and the treatment of existing reward programs, including the provincially permitted ones described in the coverage, is the specific point on which submitters have the most to gain or lose. Whether the final regulations keep the words including through third parties will decide how much of the current Canadian rewards market survives.

Watch for the registration mechanics. The Act cannot come into force until these regulations are finalized, and the draft leaves the operational detail of Bank of Canada registration, who must file, in what form, and with what transition for issuers already serving Canadians, to be settled through this process. A long transition would soften the end of 2027 start; a short one would make it a hard dividing line of the kind the United States faces in January.

Watch the banks' tokenized deposit project alongside the stablecoin track. Canada's six largest banks are exploring a shared Canadian dollar tokenized system, and the banking regulator has already stated that tokenized deposits are not legally distinct from traditional deposits, which gives bank issued tokens a legal clarity that stablecoin issuers must earn through registration. If the bank system advances faster than the issuer regime, the Canadian market may end up bank led by design as much as by competition.

And watch the first Canadian dollar products under the new framework's shadow. A Canadian dollar stablecoin approved at provincial level already launched in May. Whether it seeks federal registration, and what the draft's reserve custody terms would require of it, is an early concrete test of how the regime treats products that predate it.