In short

• On October 24th, Canada announced a draft regulation for stablecoins, initiating a 60-day comment period with the goal of implementing it in the fall of 2027.
• The issuer is required to maintain a one-to-one reserve, which must be held in a Canadian custodian institution; redemption must be completed within three working days, with no fees exceeding 1%.
• Issuers are not allowed to pay interest to token holders; severe violations can result in fines of up to 10 million Canadian dollars, with the Bank of Canada responsible for supervision.

Last Saturday, Canada introduced regulations requiring companies that issue stablecoins—cryptocurrencies designed to maintain a stable value, typically at $1 per unit—to have real funds backing each token, which must be returned upon request by the holders. The draft regulations were published in the Canadian government's official gazetteer “Canada Gazette”, and at the same time, it continues to prohibit the payment of interest, or so-called yields, to the holders.

For those who hold these tokens or may use them to transfer funds overseas, these rules determine whether you can get your real cash back in case the company behind the tokens goes bankrupt, how long it will take to do so, and what costs you will have to incur.

Each token must be supported by a one-to-one reserve, which is limited to cash and government debt with a maturity of less than three months, as well as money market funds that hold only such assets.

These reserves must be held in separate accounts at Canadian custodian institutions, and in the event of the issuer's bankruptcy, creditors cannot access them. Holders can redeem any amount within three working days, with a maximum fee of 1%.

The issuer shall not be obligated to pay interest merely for holding tokens, nor shall payments be made indirectly through third parties: Any arrangement that allows holders to earn income from holding tokens, including sharing in the issuer's revenues, is considered an indirect payment. Rewards that are related to the use of tokens, rather than merely holding them, are still permitted.

The notification states: "These bans are intended to distinguish stablecoins from financial products that directly compete with bank deposits or other interest-bearing instruments." As long as the reserves always equal at least the number of tokens in circulation, issuers can still retain the profits generated by their reserves.

Issuers are also not allowed to promote tokens as bank deposits, or claim to have deposit insurance or government guarantees; complaints must be confirmed within seven days and resolved within 30 days.

The "Stablecoin Act" became law on March 26, 2026, following the announcement of this plan in Ottawa's November 2026 budget. The Bank of Canada will be responsible for the registration and regulation of issuers.

The Director of Payments, Regulation, and Supervision at the Bank of Canada, Ron Morrow, stated at a meeting held in Ottawa in September 2025: "There is an urgent need for faster, cheaper, more transparent, and more accessible cross-border payment services."

In the United States, President Donald Trump signed the US Stablecoin Act on July 18, 2025 GENIUS Act. This act also prohibits issuers from paying interest to holders.

Since then, the controversy has focused on whether crypto platforms should be allowed to offer returns to users. The banking industry opposes this practice, arguing that deposits may flow into the crypto sector as a result. The dispute was so intense that it even led to the failure of the Clarity Act bill in the Senate; the bill was intended to establish broader regulations for the crypto market.

Bank lobby groups oppose Clarity Act, arguing that it fails to adequately address what they consider to be vulnerabilities in GENIUS Act; current regulations allow platforms such as Coinbase to offer returns to customers who hold USDC stablecoins in their accounts.

As disputes over stablecoins now extend to Canada's northern neighbor, fines will start from C$1 million, with severe violations potentially reaching up to C$10 million, such as failing to maintain sufficient reserves or not redeeming tokens at face value. The notification assumes there are 5 issuers involved, and approximately another 30 payment companies will also fall under the regulatory scope of the Bank of Canada, including crypto platforms that hold customer tokens in wallets.

Ottawa will accept comments for 60 days, with the deadline being around December 23rd. The notice states: "The proposed regulations are expected to come into effect in the fall of 2027."