Canada Proposes Strict Stablecoin Rules: Redemption Capped, No Yield
Canada has published draft rules for stablecoin issuers, setting a 1% cap on redemption fees and banning interest payments, as reported by Decrypt.
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Key Points of New Canadian Stablecoin Regulation Proposal
Canada has released draft regulations for stablecoin issuers, according to Decrypt. The proposed rules require that every stablecoin be fully backed by either cash, government debt with a maturity of three months or less, or money market funds consisting solely of such assets. All reserves would need to be held with a Canadian custodian in accounts protected from creditors if an issuer goes bankrupt.
Redemption fees for stablecoins are capped at 1%, and any holder can redeem coins within three business days. Additionally, the draft regulation strictly prohibits paying interest for holding stablecoins or offering indirect yield through third-party arrangements. Only rewards connected to the use—not the holding—of a coin remain permitted.
Issuers are not allowed to market stablecoins as bank deposits or claim deposit insurance or government guarantees. The Bank of Canada will register and supervise issuers and related payment companies. The new rules introduce steep penalties: up to 1 million Canadian dollars for serious violations and up to 10 million for very serious ones, such as failing to maintain full reserves. Ottawa will collect public comments on the draft for 60 days, aiming to implement the regulation by fall 2027.
For those involved in USDT or similar stablecoins, these changes may impact how card-based payment processing and redemptions work in Canada.
Source: Decrypt