Canada has proposed new rules for stablecoin issuers, aiming to strengthen consumer protections and stabilize the crypto market. The draft regulations, published in the Canada Gazette on Saturday, require that every stablecoin be fully backed by reserves consisting of cash, short-term government debt, or money market funds. These reserves must be held in separate accounts with a Canadian custodian, ensuring they remain inaccessible to creditors if the issuer faces bankruptcy.
The rules also cap redemption fees at 1% and ban issuers from paying interest on stablecoins, whether directly or indirectly. This prohibition is designed to prevent stablecoins from competing with traditional bank deposits. However, rewards tied to the use of stablecoins rather than holding them would still be permitted. Issuers must also avoid presenting stablecoins as bank deposits or claiming government guarantees.
The Stablecoin Act, which became law on March 26, 2026, will see the Bank of Canada overseeing issuers. Penalties for violations range from 1 million Canadian dollars for serious offenses to 10 million for very serious ones, such as failing to maintain adequate reserves. The proposed regulations are open for public comment until roughly December 23, with an expected implementation in fall 2027.
In the United States, the GENIUS Act, signed by President Donald Trump on July 18, 2025, similarly bars issuers from paying interest on stablecoins. The debate over stablecoin regulations has been contentious, particularly regarding whether crypto platforms should be allowed to offer yield to users, a provision that banks oppose.