Canada consults on stablecoin rules banning yields with 2027 target

Canada has opened a 60-day public consultation, closing 23 December, on draft regulations that would formalise the country’s framework for fiat-pegged stablecoins. Non-bank issuers would be required to hold reserves equal to circulating tokens at qualified Canadian financial institutions, covering banks, credit unions and trust companies, and would have to redeem tokens within three business days with fees capped at 1 percent. Yield payments to holders, whether direct or routed through third parties, would be prohibited, though transaction-linked rewards would remain permissible.

The draft rules flow from the Stablecoin Act passed earlier this year and are described by the government as the regulations needed to bring that legislation into force and enable issuers to register with the Bank of Canada. Canada’s banking sector has publicly backed the yield prohibition, citing concerns that interest-bearing stablecoins could draw deposits away from traditional lenders and reduce their capacity to extend credit, a concern that has surfaced in similar form in US policy debates.

A regulatory wrinkle already exists on the ground: Coinbase Canada received permission from the Ontario Securities Commission this year to offer yields on eligible tokens, subject to risk disclosures and clarification that funds are not deposit-insured. That provincial carve-out sits in tension with what the federal framework proposes. Separately, Tetra Trust Company launched CADD, a Canadian-dollar stablecoin approved by Alberta Treasury Board and Finance, in May, and Canada’s six largest banks announced last month that they are exploring a tokenised Canadian-dollar system for inter-bank settlement. The stablecoin framework is expected to take effect toward the end of 2027.