Canada Opens Stablecoin Consultation With Proposed 1% Fee Cap

On Saturday, Canada kicked off a 60-day public consultation regarding draft stablecoin regulations aimed at non-bank issuers. The proposal introduces a 1% limit on redemption fees while maintaining a prohibition on paying interest to coin holders. Public feedback is open until December 23.

Under the draft terms, issuers would be mandated to maintain reserves that completely match the value of their outstanding tokens, alongside ensuring holders can redeem them within a three-business-day window. Ottawa is targeting the fall of 2027 for these regulations to officially take effect.

Ottawa wants cross-border alignment with U.S. rules

Published inside the Canada Gazette, the draft rules are designed to establish registration guidelines with the Bank of Canada for non-financial institution stablecoin creators. The administration explains that this structure mirrors regulations found in the United States and other international markets, easing regulatory hurdles for cross-border businesses.

Although the Stablecoin Act officially became law on March 26, 2026, the newly proposed framework delivers the necessary provisions for its operational rollout. CoinDesk noted that the consultation period stays open through December 23.

Canada stablecoin rules: full reserves, three-day redemption, 1% fee cap

Backing reserves must completely equal the total worth of all circulating stablecoins. Eligible reserve assets are strictly limited to cash, government-issued debt that matures within three months, and money market funds that exclusively invest in those approved assets.

Issuers would be required to deposit their reserves with eligible Canadian financial institutions, which include trust companies, credit unions, and banks. The framework mandates that these must be kept in separate accounts shielded from an issuer’s creditors in the event of bankruptcy. Holders retain the right to request a redemption of any amount, which must be paid out within three business days while keeping fees restricted to a maximum of 1% of the redeemed total.

Additionally, the guidelines forbid issuers from portraying any token as a bank deposit, or suggesting it benefits from government guarantees or deposit insurance.

Yield ban would cover indirect payments but allow transaction rewards

Issuers are barred from issuing interest directly or via third parties merely for holding a stablecoin. Any structure that transfers an issuer’s reserve profits to token holders is likewise classified as indirect yield, though rewards directly tied to token utilization remain permissible. Issuers are permitted to retain earnings generated by reserves as long as those reserves continue to fully back all circulating tokens.

According to the government announcement, these limitations seek to differentiate stablecoins from traditional products that directly compete with bank deposits or alternative interest-bearing financial assets. Back in June, Canadian Bankers Association representative Natalle Begeron informed The Logic that the organization “firmly supports” the yield prohibitions outlined in the Stablecoin Act.

While the draft addresses rewards funded directly by issuers, it does not unilaterally determine the treatment for every independently funded exchange reward initiative. Decrypt pointed out that transaction-based rewards—those connected to usage rather than passive holding—will still be allowed.

Bank of Canada would supervise issuers

Oversight and registration of these issuers would fall under the Bank of Canada. Government estimates suggest this supervision will encompass five stablecoin issuers alongside roughly 30 supplementary payment entities, such as crypto platforms managing user funds within digital wallets.

Proposed financial penalties span from C$1 million for major infractions up to C$10 million for severe violations. Critical violations specifically include failing to uphold proper reserves or processing redemptions below par value.

Ottawa targets fall 2027 for the regulations to take effect

The government’s stated goal is to bring these proposed rules into force by the fall of 2027. Once operational, non-bank stablecoin creators functioning inside Canada must secure Bank of Canada registration prior to launching any stablecoin.

For the present moment, the primary milestone is the December 23 consultation deadline. Final regulations are subject to adjustment based on public feedback, even as Ottawa maintains its fall 2027 implementation timeline.

FAQ

When did Canada’s Stablecoin Act become law?

The Stablecoin Act officially became law on March 26, 2026, while the recent consultation focuses on the supplementary regulations required to enact its framework.

Can stablecoin issuers keep earnings on their reserves?

Yes, the proposed framework permits issuers to hold onto reserve earnings provided that the total reserves match or exceed the value of all outstanding tokens.

Could a token count as a bank deposit under the proposal?

No, the draft explicitly prevents issuers from marketing a token as a bank deposit or claiming it holds government backing or deposit insurance.

What would happen if an issuer failed to maintain adequate reserves?

Failing to maintain sufficient reserves or executing redemptions below par value are categorized among the most egregious violations, carrying potential fines reaching C$10 million.

When would issuers need to register before issuing a stablecoin?

This registration mandate would become active once the final regulations go into effect, which Ottawa has scheduled for the fall of 2027, following the close of the consultation on December 23.

This article is for information only and is not financial advice.