Canada has opened a 60-day public consultation on draft stablecoin regulations that would ban issuers from paying interest to token holders and require non-bank issuers to keep their reserves with Canadian financial institutions.
The consultation runs until December 23 and follows the passage of the Stablecoin Act earlier this year. The proposed regulations are needed to bring the legislation into force and establish the requirements for issuers seeking registration with the Bank of Canada, the federal government said.
The proposed rules would prohibit interest payments made directly by issuers or indirectly through third parties to encourage customers to hold stablecoins. Rewards tied to transactions would remain permitted.
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The restrictions come as Canada’s banking industry pushes
The restrictions come as Canada’s banking industry pushes for limits on stablecoin yields. Banks have raised concerns that interest-bearing digital tokens could draw deposits away from traditional financial institutions, reducing the funds available for lending.
The proposals would also require non-bank issuers to hold reserves equal to the value of their circulating fiat-backed stablecoins. Those reserves would have to be deposited with eligible Canadian institutions, including banks, credit unions and trust companies.
Issuers would need to let customers redeem their tokens for conventional currency within three business days, with fees capped at 1%.
Some crypto platforms already offer stablecoin rewards
Some crypto platforms already offer stablecoin rewards in Canada. Coinbase Canada (NASDAQ: $COIN) received permission from the Ontario Securities Commission this year to offer yields on eligible tokens, subject to risk disclosures and warnings that the funds are not covered by deposit insurance.
The federal framework is expected to take effect toward the end of 2027.
Meanwhile, Canada’s six largest banks, Royal Bank of Canada (NYSE: $RY), TD Bank (NYSE: $TD), CIBC (NYSE: $CM), Bank of Montreal (NYSE: $BMO), Scotiabank (NYSE: $BNS) and National Bank of Canada (TSX: $NA) said late last month they were exploring a Canadian-dollar tokenized system to speed up transfers between financial institutions.
The announcement followed a September 10 statement from the Office of the Superintendent of Financial Institutions that tokenized deposits are “not legally distinct from traditional deposits.”
