Canada’s Draft Stablecoin Rules Cap Redemption Fees at 1% and Ban Yield

These proposed rules, published in the Canada Gazette, establish that reserves must be held with Canadian custodians. These reserves are limited to cash and government debt maturing in three months or less, alongside money market funds holding only such assets.

Holders can redeem any amount within three business days, with the associated fee capped at 1%. Furthermore, the regulations maintain a prohibition on issuers paying holders interest, or yield.

The notice specifies that any arrangement allowing someone to earn yield from holding a coin, such as sharing issuer income, constitutes an indirect payment and is prohibited. However, rewards linked to actively using a coin, rather than merely holding it, remain permitted.

Issuers are also barred from presenting a coin as a bank deposit or claiming any form of government guarantee or deposit insurance. Complaints must be acknowledged within seven days and resolved within 30.

Serious breaches of these rules could incur penalties reaching up to C$10 million, with the Bank of Canada tasked with supervising the issuers.

The proposed framework aims to differentiate stablecoins from traditional financial instruments that compete with bank deposits or other interest-bearing products, as stated in the notice.

The Bank of Canada's executive director of payments, supervision and oversight, Ron Morrow, previously stated that there is a "pressing need for faster, cheaper, more transparent and more accessible cross-border payments services."

This development occurs as other jurisdictions are addressing similar issues; for instance, the United States enacted the GENIUS Act on July 18, 2025, which also forbids issuers from paying holders interest.

These regulatory shifts reflect a broader global trend among market participants and institutions to impose greater structural clarity and risk mitigation on digital asset instruments interacting with traditional finance rails.

Why it matters

These regulations signal a significant regulatory push toward traditional financial stability for stablecoins in Canada. The strict controls on yield and reserves will directly impact how DeFi protocols and stablecoin issuers operate within the Canadian jurisdiction. Readers should watch how these rules compare to the U.S. GENIUS Act regarding yield offerings.