Canada Opens 60 Day Stablecoin Consultation, Keeps Ban on Yield

Non-bank stablecoin issuers in Canada would still be barred from paying holders interest under proposed regulations the Department of Finance published in the Canada Gazette on October 24, 2026. Publication opened a 60-day public consultation that closes at 11:59 p.m. EST on December 23. The retained yield prohibition already sits awkwardly with at least one product on the Canadian market.

The Stablecoin Act received Royal Assent on March 26, 2026, through Bill C-15. The draft regulations are, in the government's words, "required to bring the SCA into force and would prescribe the elements needed for issuers to register with the Bank of Canada."

What the draft requires

Non-bank issuers of fiat-backed stablecoins with interprovincial or international reach would have to register with the Bank of Canada. A token used only within a single province would fall outside the framework.

Reserves must equal outstanding tokens. Accounts of the custody terms vary. One describes high-quality liquid assets held by Canadian custodians and matched daily. Another says reserves must sit with qualified Canadian financial institutions, including banks, credit unions and trust companies. Redemption must occur at par within three business days, with fees capped at 1%; one account says that cap applies to small holders.

Issuers could not pay interest or yield for holding stablecoins, including through third parties. Rewards tied to transactions would be allowed.

Banks and other prudentially regulated financial institutions are excluded and can pursue tokenized deposits or Canadian-dollar stablecoins under existing frameworks. The regime is expected to take effect in fall 2027, or toward the end of that year by another account. Around 30 crypto firms are expected to register as payment service providers once it is live.

The yield tension

The banking sector has backed the ban. The Canadian Bankers Association told The Logic in June that it:

"firmly supports the Stablecoin Act's explicit prohibition on yield, both direct and indirect."

Natalle Begeron, Canadian Bankers Association spokesperson

Market practice is less uniform. Some Canadian exchanges already pay rewards on stablecoins. Coinbase Canada received permission from the Ontario Securities Commission this year to offer yields on eligible tokens, on condition that it warned customers of the risks and that funds are not covered by deposit insurance. That permission sits at odds with the proposed federal ban.

Compliance costs are another pressure point. Daily reserve matching, Canadian custody and capped redemption fees add overhead, and firms that share reserve income with users lose a lever. A federal payments framework run through the Bank of Canada could also collide with how provincial securities regulators treat some crypto products.

The redemption window, fee cap and definition of transaction-based rewards all remain proposals open to change.

Where this fits

The bank carve-out arrives as incumbents move on their own. Late last month, Canada's six largest banks said they were exploring a Canadian-dollar tokenized system, as we reported. On Sept. 10, the Office of the Superintendent of Financial Institutions (OSFI) said tokenized deposits are "not legally distinct from traditional deposits." In May, Tetra Trust Company rolled out CADD, a Canadian-dollar stablecoin approved by Alberta Treasury Board and Finance.

The structure leaves banks free to issue under existing rules while non-bank issuers face registration, reserve and yield constraints. The banking industry's position echoes US concerns that customers could move money out of bank deposits. Submissions due by December 23 will test whether exchanges and issuers push back on the yield ban, the operating requirements, or both.