Canada has opened a 60-day public consultation on draft stablecoin rules that would keep a ban on yield payments, while requiring non-bank issuers to fully back their tokens and redeem them quickly.
The consultation, launched by the federal Department of Finance, runs until December 23. The proposed framework is expected to take effect in late 2027, as Canadian banks and regulated firms develop tokenized deposits and Canadian-dollar stablecoins.
Canada flag (Credits: CoinDesk)
Canada Stablecoin Rules: 60-Day Consultation, Ban on Yields Maintained
Under the draft rules, non-bank stablecoin issuers must back tokens 1:1 with reserves held at qualified Canadian financial institutions. They would also have to settle redemptions within three business days, with fees capped at 1%, according to CoinDesk’s summary of the proposals.
On yields, the draft maintains a prohibition on issuers paying interest, while allowing transaction-based rewards. That distinction matters: holders could still receive rewards tied to transactions, but not interest simply for holding the tokens.
The consultation comes as Canada’s banking industry presses for a ban on yield payouts. The concern, echoed in the United States, is that customers could move money out of bank accounts and into yield-paying stablecoins, leaving traditional banks with less to lend. A spokesperson for the Canadian Bankers Association told The Logic in June that the group “firmly supports the Stablecoin Act’s explicit prohibition on yield, both direct and indirect.”
What the Draft Rules Would Mean in Practice
Stablecoins are cryptocurrencies designed to hold a steady value, usually pegged to a currency such as the Canadian or US dollar. They are widely used for payments, trading and moving money across borders, which is why regulators around the world are now writing dedicated rules for them.
Canada’s draft approach focuses on three pillars: full reserve backing, so every token in circulation is matched by reserves; custody of those reserves at qualified Canadian institutions, keeping the backing inside the regulated domestic system; and prompt redemption, so holders can get their money back within three business days at a capped fee.
The yield ban is the most contested element. Supporters in the banking sector argue it protects the deposit base that funds lending. Critics of such bans, in other jurisdictions, have argued that yield is one of the main attractions of stablecoins and that banning it limits competition. The consultation gives industry, consumer groups and the public 60 days to weigh in before the rules are finalised.
Timing also matters. With the framework not expected to take effect until late 2027, firms have a long runway to prepare — but also a long period of uncertainty about the final shape of the rules. Canadian-dollar stablecoins and bank tokenized deposits are already in development, and the eventual framework will determine how freely they can operate and what they can offer holders.
For now, the message from Ottawa is clear: Canada wants stablecoins to be safe, fully backed and redeemable — but not a substitute savings product paying interest. Whether that balance survives the consultation will become clearer after December 23, when the feedback is in and the final rules take shape.
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Source: CoinDesk — read the full story there.
