Canada Seeks Input on Stablecoin Rules

Introduction to Stablecoin Regulations in Canada

Canada has opened a 60-day consultation on its proposed stablecoin regulations, which aim to provide a framework for the issuance and use of stablecoins in the country. The consultation, which runs until December 23, covers various aspects of stablecoin regulation, including reserve custody, redemption rights, and issuer obligations.

The proposed regulations retain the ban on issuer-paid yield, but allow for transaction-based rewards. This means that issuers cannot pay yield on holdings, but can offer rewards tied to transactions. The draft regulations also require reserves to be held with qualified Canadian financial institutions and cap redemption fees at 1%.

Key Provisions of the Proposed Regulations

The proposed regulations include several key provisions, including:

• 1:1 backing of stablecoins with Canadian dollars or other fiat currencies
• Reserves to be held with qualified Canadian financial institutions
• Redemption fees capped at 1%
• No minimum redemption amount
• Transaction-based rewards permitted, but issuer-funded yield prohibited

The Canadian Web3 Council has welcomed the proposed regulations, but has called for a narrower yield prohibition. The council has argued that the current prohibition could capture arrangements unrelated to the government's policy concern and has requested explicit permission for usage-based incentives, merchant rebates, and loyalty programs.

Background and Timeline of Stablecoin Regulations in Canada

The development of stablecoin regulations in Canada has been a gradual process. In 2025, the Canadian government announced its intention to regulate stablecoins, and since then, various stakeholders have been working together to create a framework for the issuance and use of stablecoins.

The proposed regulations are the result of this collaborative effort, and they aim to provide a clear and comprehensive framework for the stablecoin industry in Canada. The consultation period, which runs until December 23, provides an opportunity for stakeholders to provide feedback and input on the proposed regulations.

Expert Perspective on Stablecoin Regulations

Experts in the field of stablecoins and cryptocurrency have welcomed the proposed regulations, citing the need for clear and comprehensive guidelines for the industry. They have also highlighted the importance of ensuring that the regulations are flexible and adaptable, in order to accommodate the rapidly evolving nature of the stablecoin market.

According to some experts, the proposed regulations are a step in the right direction, as they provide a clear framework for the issuance and use of stablecoins in Canada. However, others have expressed concerns that the regulations may be too restrictive, and may stifle innovation in the industry.

Implications for Readers in India

The proposed stablecoin regulations in Canada may have implications for readers in India, particularly those who are interested in investing in or using stablecoins. The regulations may provide a model for other countries, including India, to follow in regulating their own stablecoin industries.

Additionally, the regulations may have implications for Indian businesses that operate in the stablecoin space, particularly those that have partnerships or operations in Canada. It is essential for these businesses to understand the proposed regulations and their potential impact on their operations.

What to Watch Next

As the consultation period for the proposed stablecoin regulations comes to a close, stakeholders will be watching closely to see how the regulations are finalized and implemented. It is expected that the final regulations will be announced in early 2027, and will come into effect shortly thereafter.

In the meantime, stakeholders will be monitoring the progress of the regulations and providing feedback and input to the Canadian government. It is also expected that other countries, including India, will be watching the development of stablecoin regulations in Canada, and may use them as a model for their own regulatory frameworks.

Comparison with US Stablecoin Rules

Across the border, the Office of the Comptroller of the Currency has completed its GENIUS Act rule, which sets January 18, 2027, as the effective date. The final rule retains the statutory ban on issuer-paid interest or yield solely connected with holding, using, or retaining a payment stablecoin.

The OCC bulletin covers reserve assets, redemption, risk management, custody, capital, applications, and supervision. The regulator says transaction-based payments require examination of their specific terms and that payments that do not constitute interest or yield, or are not made solely in connection with holding, using, or retaining the token, would not be prohibited.

Canadian Banks and Tokenized Deposits

Canadian lenders are developing digital payment products alongside the stablecoin framework. A shared tokenized deposit project has been announced, which focuses on transfers of tokenized Canadian-dollar deposits between participating financial institutions.

The banks involved in the project include Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank. The project's first phase focuses on transfers of tokenized Canadian-dollar deposits between participating financial institutions, with connections to other digital asset programs to follow later.

Each tokenized deposit remains a liability of its issuing bank, representing money already held there. Canada's Office of the Superintendent of Financial Institutions has said that digitizing a deposit does not change its legal character.

CADD Stablecoin

A separate Canadian-dollar stablecoin, CADD, has gained Anchorage Digital institutional custody. Tetra Digital Group said institutions could hold the token with the US federally chartered crypto bank. CADD is backed one-to-one by Canadian dollars held at a licensed Canadian trust company and received approval from Alberta regulators.