Canada has proposed rules requiring covered stablecoin issuers to back balances with reserves and initiate redemption within three business days. Redemption fees would be capped at 1 per cent, while interest for holding balances would be prohibited. The draft opens a 60-day consultation, with the government targeting implementation in autumn 2027. Banks fall outside the same issuer regime.
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Redemption would begin within three business days
Canada published proposed stablecoin rules on October 24, setting out how issuers would return money to holders and safeguard the assets backing their tokens. Stablecoins covered by the proposal are tied to a reference currency. The draft follows legislation that received royal assent in March and is open to public comment for 60 days. The government aims to implement the framework in autumn 2027.[1], [2]
A holder requesting redemption would receive one unit of the reference currency for each corresponding stablecoin unit. Within three business days, the issuer would have to liquidate any necessary reserve assets and initiate the currency transfer. It could impose no minimum redemption amount. The fee would be capped at 1 per cent of the amount redeemed, and any fee increase would require at least seven days’ notice.[1]
Reserves must cover every outstanding unit
The reserve’s market value would have to cover outstanding stablecoins at each day’s end, in the same reference currency. Permitted holdings include cash and demand deposits, government debt with no more than three months to maturity, qualifying one-business-day reverse repurchase agreements, and money market funds invested entirely in eligible assets. Issuers could withdraw income earned on reserves while keeping the required backing intact.[1]
A qualified custodian incorporated in Canada would hold the reserves. Separate accounts would be required for each stablecoin, with assets kept apart from insolvency estates. The proposed framework also calls for governance, risk management, data security, complaints procedures and recovery arrangements. Payment service providers brought within the related rules would face obligations to safeguard funds as well.[1]
Holding yield would be prohibited
Covered domestic and foreign issuers outside the existing prudentially regulated financial sector would register with the Bank of Canada. Exempt financial institutions, including banks, would stay outside that issuer regime. Issuers could not pay interest or yield merely for holding stablecoin balances, although rewards tied solely to use could be permitted. They could not describe the tokens as government-guaranteed, publicly deposit-insured or legal tender. These requirements remain proposals pending the regulatory process.[1]
