Canada moves to ban stablecoin interest, force full reserves, put issuers under Bank of Canada oversight

Canada has published draft rules that would require stablecoin issuers to back every token one-for-one, bar them from paying interest, and place them under Bank of Canada supervision. The Department of Finance released the proposals in the Canada Gazette on October 24, 2026, opening a 60-day consultation that closes in late December.

Stablecoin regulation would require fully backed reserves

Under the proposed framework, covered issuers would have to register with the Bank of Canada and maintain reserves equal to at least the value of their outstanding tokens. They would also need policies addressing redemption, risk management, data security and corporate governance.

Eligible reserves would be limited to highly liquid assets. These include demand deposits, government debt securities maturing within three months, certain money market funds and short-term repurchase arrangements.

Stablecoin regulation would also impose requirements on where those assets are held. Issuers would need to use qualified custodians incorporated in Canada, with safeguards designed to protect token holders if the issuing company becomes insolvent.

Transparency obligations would accompany the reserve requirements. Issuers would have to disclose information about their backing assets and submit monthly reports to the Bank of Canada, giving supervisors recurring information about the funds supporting tokens in circulation.

The Department of Finance linked the regulatory effort to growing stablecoin use in cross-border payments and other financial services. It also identified inadequate reserves, issuer insolvency and operational failures as concerns the framework seeks to address.

Redemption rights and interest ban target consumer risks

Stablecoin regulation would give holders the right to redeem their tokens at face value in the underlying currency. Issuers would be required to initiate payment within three business days after receiving a redemption request.

That wording sets a deadline for starting payment, rather than explicitly requiring every redemption to be completed within that period. The obligation would sit alongside the proposed reserve and risk management requirements.

Issuers would also be prohibited from paying interest or yield simply because a customer holds stablecoins. Separately, the rules would restrict misleading representations that tokens are government-backed or insured.

Stablecoin regulation would therefore address both the assets supporting tokens and the claims made when offering them to users. Full reserve backing would be required, but issuers could not present that requirement as equivalent to government insurance.

These measures remain proposals subject to consultation. Stakeholders can comment on their design before the regulatory framework is finalized.

Bank of Canada oversight would cover nonbank issuers

Stablecoin regulation would generally apply to domestic and foreign nonbank issuers engaged in issuance in Canada. Prudentially regulated financial institutions, including banks and credit unions, would fall outside that framework.

The distinction defines which businesses would face the proposed registration and supervisory requirements. The Bank of Canada would serve as the principal supervisor for covered nonbank issuers, while the finance minister would have specific national security review powers.

The government also proposes extending oversight under the Retail Payment Activities Act to payment service providers handling stablecoin transactions. Depending on their activities, that could include certain cryptocurrency exchanges, digital wallets and payment processors.

Stablecoin regulation would consequently reach beyond token issuance into parts of the infrastructure used to move and spend digital funds. The proposals address both the businesses responsible for backing tokens and service providers facilitating transactions.

U.S. GENIUS Act provides an international comparison

Stablecoin regulation in Canada shares several features with the U.S. GENIUS Act, which President Donald Trump signed into law on July 18, 2025. Both approaches emphasize one-to-one reserves, liquid backing assets, redemption rights and issuer disclosures.

The American law establishes a framework for payment stablecoins that allows qualified issuers to operate under federal or state supervision. Eligible reserve assets include U.S. dollars and short-term Treasury securities.

On October 21, the Office of the Comptroller of the Currency announced final regulations covering stablecoin issuance and related activities by entities under its jurisdiction. Those regulations and the GENIUS Act are scheduled to take effect on January 18, 2027, according to the report.

Canada’s government has acknowledged the U.S. legislation, Europe’s Markets in Crypto-Assets framework and regulatory regimes in Asia as elements of a wider international move toward formal oversight.

Stablecoin regulation now enters a public consultation phase in Canada, giving issuers, payment companies and token holders an opportunity to influence the proposed safeguards before the country completes its dedicated federal framework.