Canada proposes new regulatory framework for stablecoins

Canada has released draft regulations for stablecoins, initiating a consultation period that will run until December 23, 2026. The proposed framework, which is expected to be implemented by fall 2027, aims to regulate non-bank issuers of fiat-backed stablecoins, including qualifying foreign entities.

Key provisions of the proposal include a requirement for issuers to maintain reserves equal to at least 100% of outstanding stablecoins, with these assets held at qualified Canadian financial institutions. The regulations also mandate that redemptions must be processed within three business days and cap redemption fees at 1%.

A significant component of the draft is the prohibition of interest payments or yield linked to stablecoin holdings, a move intended to prevent capital flight from traditional banking institutions. However, the framework would permit rewards that are specifically tied to transactions. The Bank of Canada is expected to oversee the supervision of issuer registration, reserve compliance, and redemption obligations.