Canada opens 60-day stablecoin consultation with yield ban intact

What happened

Canada has opened a 60-day public consultation on draft stablecoin rules for issuers that are not financial institutions. The Department of Finance published the proposal in the Canada Gazette on Oct. 24, and comments run until Dec. 23, 2026, Crypto.news reported. Cointelegraph said the government gave notice of the comment period on Saturday. The proposal sits under the Stablecoin Act, passed in March, which targeted non-financial institution issuers.

The draft keeps a ban on issuer-paid interest or yield, which Cointelegraph said is intended to discourage holding tokens for returns. Crypto.news reported that rewards tied only to transactions would be allowed, while arrangements rewarding larger balances or longer holding periods would be barred. The rules would require 1:1 backing, reserves held with qualified Canadian financial institutions or Canadian-domiciled custodians, and segregation from issuer and custodian assets. Reserves would also be shielded from other creditors if an issuer failed.

Redemption would have to be completed within three business days, including liquidating reserves and starting the fiat transfer, with fees capped at 1% and no minimum redemption amount. Non-financial issuers would need to apply for registration with the Bank of Canada before issuing once the regulations take effect, which the government intends in fall 2027. The framework would cover domestic and foreign non-financial issuers that make fiat-backed stablecoins available to Canadians, directly or indirectly, whatever currency the token references.

The Department of Finance is leading the regulation work. The Bank of Canada would register issuers, supervise compliance, monitor issuance and redemption risks and enforce the rules. The government said the proposal seeks consistency with the United States and other jurisdictions to reduce the regulatory burden on issuers active in multiple markets.

Why it matters

The consultation turns the Stablecoin Act's broad policy into an operating rulebook for non-bank issuers, and its cross-border reach is notable. Foreign issuers serving Canadian users would fall inside the framework even if their tokens reference another currency. The yield ban also separates returns for holding a token from incentives for using it, a distinction that will shape product design. Reserve, custody and redemption conditions address what backs a token, where it is held and how quickly holders can exit. The government's stated aim of alignment with the US and other markets adds a competitive dimension, because issuers may face similar but not identical rules in several jurisdictions.

Background

Canada's Stablecoin Act passed in March and was intended to address non-financial institution issuers. The government said the proposed regulations were needed to enact the policy and to set up registration with the central bank. The 2025 budget set aside C$10 million over two years starting in 2026 for administration, with C$5 million in annual costs to be recovered from regulated issuers, Crypto.news reported. The Canadian Web3 Council asked in a Sept. 8 pre-budget submission for a narrower yield ban and explicit permission for usage-based incentives, merchant rebates and loyalty programs. It also recommended segregated, bankruptcy-remote reserves and Canadian custody for domestically issued tokens, and proposed reciprocity with other jurisdictions for foreign-issued tokens used by Canadians.

What is still unclear

Several points remain open. The reports do not say whether the final rules will adopt the council's recommendations on third-party rewards or reciprocity for foreign issuers. The draft allows transaction-based rewards but bars issuer-funded holding incentives; how regulators will separate the two in complex arrangements is not fully settled in the published descriptions. In the US, the Office of the Comptroller of the Currency said transaction-based payments require examination of their specific terms and that existing rewards programs receive no automatic exemption. Canada's consultation could also change custody, disclosure or registration details before the fall 2027 target.

What to watch

Participants will watch the final regulations after the Dec. 23 deadline, the Bank of Canada's registration process and any guidance on transaction rewards. Cross-border issuers will track how Canada treats foreign tokens and whether reciprocity arrangements emerge. The US timeline is another marker: the OCC's GENIUS Act rule takes effect Jan. 18, 2027, and a waiver can last up to 12 months from that date. In Europe, MiCA could require exchanges to stop offering non-compliant stablecoins by January, Cointelegraph reported. Canadian banks are separately developing tokenized deposits, with Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank taking part in a first phase focused on transfers of tokenized Canadian-dollar deposits between participating institutions.

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