Canada Proposes Stablecoin Rules Capping Redemption Fees at 1%

Canada proposed stablecoin regulations on Saturday that would require issuers to maintain one-to-one reserves and return money when holders request redemption. The draft appeared October 24 in the Canada Gazette, the government's official newspaper. Ottawa opened a 60-day consultation ending around December 23. The notice sets fall 2027 as the intended implementation period.

Stablecoins are crypto tokens intended to maintain a stable value, typically one U.S. dollar. The proposed reserves would be restricted to cash, government debt with maturities of three months or less, and money market funds invested exclusively in those assets. Issuers would keep reserves with Canadian custodians in separate accounts beyond creditors' reach if an issuer becomes bankrupt. Holders would be able to redeem any amount within three business days, with a maximum fee of 1%.

The draft would retain a ban on issuers paying interest solely because someone holds a stablecoin. The prohibition would also cover indirect yield payments through third parties, including arrangements that distribute an issuer's income to holders. Rewards for using a stablecoin, rather than holding a stablecoin, would remain permissible. The notice says the restrictions aim to separate stablecoins from products that compete directly with bank deposits and other interest-bearing instruments. Issuers could retain earnings from reserves provided the reserves remained at least equal to outstanding coins.

Issuers would be prohibited from describing stablecoins as bank deposits or claiming that deposit insurance or a government guarantee applies. Issuers would need to acknowledge complaints within seven days and resolve complaints within 30 days. Proposed penalties would reach C$1 million for serious violations and C$10 million for very serious violations. Very serious violations would include insufficient reserves or failure to redeem at par value.

The Bank of Canada will register and supervise issuers under the Stablecoin Act, which became law on March 26, 2026. Ottawa had announced the plan in the November budget. The notice assumes five issuers would come under Bank of Canada oversight. The notice also anticipates oversight of about 30 additional payment companies, including crypto platforms that store customers' coins in wallets.

Ron Morrow, the Bank of Canada's executive director of payments, supervision and oversight, spoke at an Ottawa conference in September 2025. Morrow said cross-border payment services urgently need greater speed, lower costs, more transparency and wider accessibility.

In the United States, President Donald Trump signed the GENIUS Act on July 18, 2025. The stablecoin law also prohibits issuers from paying interest to holders. Subsequent debate has focused on whether crypto platforms should be allowed to provide yield to users. Banks oppose platform yield because banks say deposits could move into crypto.

The dispute contributed to the failure of the Clarity Act in the Senate, separate legislation intended to establish broader crypto market rules. The banking lobby opposed the Clarity Act because the lobby considered the legislation insufficient to close a perceived loophole in the GENIUS Act. The GENIUS Act currently permits platforms such as Coinbase to offer yield to customers holding USDC stablecoins in platform accounts.