Canada Opens Consultation on Stablecoin Rules and Yield Ban
Ottawa wants nonbank issuers to follow strict reserve and settlement requirements. The ban on stablecoin yield lines up with the debate in the U.S.
Key Takeaways
- Canada is launching a 60-day public consultation on new stablecoin rules.
- Nonbank issuers would have to keep reserves at Canadian financial institutions and make stablecoins redeemable within three business days.
- The draft rules ban yield payments on stablecoins, while transaction-related rewards would still be allowed.
Canada has started a 60-day public consultation on new stablecoin rules. The draft rules keep a ban on yield payments in place and place stricter requirements on nonbank issuers for their reserves and the settlement of redemptions.
Stricter Requirements for Issuers
According to the government, nonbank stablecoin issuers must keep their reserves at Canadian financial institutions. That includes banks, credit unions, and trust companies. The rules are meant to put the Stablecoin Act, which was passed earlier this year, into effect.
The government says the draft rules spell out the requirements needed for registration with the Bank of Canada. Issuers would have to hold reserves equal to all circulating fiat-backed tokens. Customers would also need to be able to exchange their stablecoins for regular currency within three business days. Redemption fees would not be allowed to go above 1%.
No Interest on Stablecoins
The most controversial part is the yield ban. The draft rules would ban issuers from paying interest, including through third parties, to encourage customers to hold their tokens. Rewards directly tied to transactions would still be allowed.
Canada's banking sector has been pushing for such a ban for some time. Banks worry that otherwise customers could pull money out of bank accounts, leaving traditional institutions with less to lend. That debate is also playing out in the United States, where policymakers are also discussing limits on stablecoin yield to reduce outflows from banks. Regulators elsewhere are moving in the same direction too: in the U.S., the OCC put stablecoin rewards under pressure in the final GENIUS Act rules.
Why This Matters
For European crypto readers, Canada shows how regulators are increasingly treating stablecoins as a separate payments and settlement product. The mix of reserve requirements, fast redemption, and a yield ban could matter for firms using stablecoins for trading, payments, or treasury management. It also shows that the line between crypto and traditional banking is coming under more regulatory scrutiny.
