Canada Publishes Draft Stablecoin Regulations: Bank of Canada Registration, 1:1 Reserves and a Ban on Yield

The proposed rules under the Stablecoin Act would require par redemption within three business days, cap redemption fees at 1% and bar interest paid directly or through partners. Comments are open for 60 days, and the government intends the rules to take effect in fall 2027.

Canada Publishes Draft Stablecoin Regulations: Bank of Canada Registration, 1:1 Reserves and a Ban on Yield — editorial cover artwork
Canada Publishes Draft Stablecoin Regulations: Bank of Canada Registration, 1:1 Reserves and a Ban on Yield — editorial cover artwork

By Elena Marsh, Journalist, Stablecoins

Canada's Department of Finance has published the proposed Stablecoin Regulations in the Canada Gazette, Part I (Vol. 160, No. 43) on 24 October 2026. They set out how the Stablecoin Act, which received royal assent in March 2026, would work in practice. Stablecoin issuers that are not financial institutions would have to register with the Bank of Canada. They would also have to back each token at least one-to-one with high-quality liquid assets, redeem at par within three business days, cap redemption fees at 1%, and stop paying holders interest or yield. The rules are a proposal. Interested parties have 60 days from publication to comment, and the government intends the regulations to come into force with the Act in fall 2027.

The package also amends the Retail Payment Activities Regulations. This brings payment service providers that use stablecoins under the Bank of Canada's retail payments supervision.

Reserves, custody and redemption

Under the draft, an issuer must hold a reserve denominated in the token's reference currency. At the end of each day, its market value must be equal to or greater than the value of outstanding stablecoins. Eligible assets are limited to four types:

  • demand deposits, including cash
  • government debt securities with three months or less to maturity
  • one-business-day reverse repurchase agreements on that same short-dated government debt
  • money market funds made up entirely of those assets

Reserve assets cannot be pledged as collateral. They must sit with a qualified custodian incorporated under federal or provincial law, in a segregated, bankruptcy-remote account.

Redemption must be one-to-one in the reference currency, completed within three business days of the request, with no minimum amount. The Department says three days allows for T+1 settlement of Canadian securities and T+2 settlement of foreign ones in the reserve. Issuers must publish their fees, give at least seven days' notice on their website before raising them, and charge no more than 1% of the amount redeemed. The analysis notes that direct redemption fees in the current market are around 0.1%. It says a cap that low could be too restrictive for smaller or emerging issuers.

No yield, including through partners

The Act already bars issuers from paying interest or yield tied to holding a stablecoin. The draft regulations close the indirect routes as well. Any arrangement with another party, holder or not, counts as indirect interest if it lets that party earn yield from the holding or encourages it to pay yield to holders. Income-sharing deals are named as an example. Payments or rewards tied to a transaction rather than to the holding are not treated as interest.

That line matters for distribution. Sharing reserve income with distributors is one way to fund holder rewards, and the draft names income sharing explicitly. It would block that model for issuers within its scope while still allowing rewards tied to spending. The Department says it consulted extensively on yield, which industry treated as a central issue.

Who is in scope

Closed-loop stablecoins fall outside the Act. These are tokens usable only within a defined network of merchants and not redeemable by holders for fiat. The Department compares them to gift cards. For its cost estimates, the Department assumes five issuers would be covered. That baseline is based on current market players, including QCAD from Stablecorp, CADC from Loon Technology and Circle's USDC, plus potential new entrants.

Issuers already active when the Act takes effect can keep issuing without prior registration if they apply within 30 days. If they miss that window, or their application is refused, they must stop issuing. The Minister of Finance can direct the Bank of Canada to refuse an application on national security grounds.

Fees, reporting and penalties

Issuers would pay annual assessment fees to fund Bank of Canada supervision, in three tiers based on average outstanding value:

Average outstanding stablecoins (CAD) — Base fee — Variable fee

$1 billion or more — $750,000 — Share of 75% of remaining recoverable costs

$500 million to under $1 billion — $350,000 — Share of 25% of remaining recoverable costs

Under $500 million — $25,000 — None

Monthly reports to the Bank of Canada must include an accountant's opinion on the value of outstanding tokens and the reserve composition. They must also cover issuance and redemption by persons in Canada, the custodians holding reserves, and the distributors used. The administrative monetary penalty regime allows fines of up to $1 million for a serious violation and up to $10 million for a very serious one, such as failing to maintain reserves or redeem at par.

Stablecoin payment firms join the RPAA

The retail payments amendments would prescribe stablecoins, other than closed-loop ones, as units under the Retail Payment Activities Act. The Department estimates that about 30 payment service providers not previously in scope would be brought in. These include crypto trading platforms offering custodial wallets, software wallets and crypto payment processors. They would need safeguarding and operational risk frameworks and would report to the Bank of Canada. The more than 2,000 PSPs already supervised would face no incremental cost if they start using prescribed stablecoins, the analysis says.

Taken together, the draft regulations look closer to a narrow-bank model than to a light-touch registry. Reserves are short-dated and held domestically, par redemption has a hard deadline, and yield is prohibited. The tiered fees and the 30-day transition rule mean the existing CAD issuers and USDC will face the same supervisory regime from day one, while the comment period still leaves room for changes before final publication.

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