Canada’s proposed stablecoin rules bring clarity, yield restrictions

Canada’s crypto industry has cautiously welcomed new draft rules governing the use of stablecoins, digital assets designed to maintain a stable value against a currency or other financial asset, as Ottawa works to flesh out a legal framework.

But some industry players warn that restrictions on interest payments for stablecoin holders could put Canadian financial innovation at a disadvantage, even as the rules clarify areas that proponents say could boost confidence in stablecoins and give Canadians access to faster and cheaper payment systems.

The proposed rules, published last week, come after the Stablecoin Act received royal assent in March, 2026, and after U.S. legislation last year defined and set out rules for policing stablecoins.

The Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, had sparked concern that Canada’s lack of a national framework or loonie-backed stablecoin could lead Canadian dollar deposits to flow into U.S. dollar-denominated stablecoins.

Sophia Cote, head of Canadian policy at cryptocurrency exchange Kraken, said in an e-mail that bringing stablecoin payments into the Retail Payments Activities Act is “a smart move.” Consumer protections, including strict reserve requirements, segregated assets and clear redemption rights also “stand out as positives” in the draft regulations, she said.

Canadian issuers would be required to redeem stablecoins within three business days of receiving a request, with no minimum redemption amount, according to the draft rules.

“We’re encouraged by the government’s approach and look forward to continuing to work with the Department of Finance and the Bank of Canada through the consultation,” she said.

But Coinbase Canada CEO Eric Richmond said that a restriction on platforms paying interest to holders of digital tokens is a missed opportunity in rules that he otherwise characterized as “welcome step” toward a “workable framework for stablecoins.”

“Canada had a chance to lead globally in terms of issuers being able to provide yield,” Mr. Richmond said. Under the new rules, he said, Canada will lag the U.S., where token-holders are paid out rewards for stablecoins they hold on third-party platforms.

The draft regulations, which were published last Friday, are subject to a 60-day public consultation period.

Bank customers already earn yield on their deposits, and stablecoin backers have argued that allowing platforms to pay token-holders in a similar manner would make stablecoins more legitimate and useful as payment instruments.

Critics have raised concerns that allowing interest payments to stablecoin holders could drain deposits away from Canadian banks.

If issuers are allowed to offer yield, a stablecoin “is acting as a savings account,” said James Emerson, a Toronto-based senior manager at KPMG’s Digital Asset Center of Excellence. “And the worry from the banks is yields on stablecoin payments are much higher than the average yield on a savings account.”

Under the draft rules, instead of yield stablecoin rewards would be tied to transactions, similar to credit cards that earn cash back.

“The issuers just end up holding that yield that they’re generating, rather than being able to provide that to the customers,” Mr. Richmond said.

A key nuance is that platforms such as Coinbase can still pay out rewards to customers on a provincial level, one of many quirks involved in reconciling how stablecoins are regulated provincially versus federally.

In Canada, digital currencies have largely been treated as securities, which are under the jurisdiction of provinces and territories. But they can also be characterized as a form of payment instrument akin to cash or credit, and so are overseen by the federal government, leaving lingering questions about regulatory authority once the new Stablecoin Act is introduced.

“We now have a single federal supervisor that brings clarity at the center, but I think from our perspective, the real test is how coherence will be at the edges,” said Mr. Emerson.

Another area that remains unclear, Mr. Emerson said, is rules around financial institutions, as existing legislation only covers non-banks. He said it is not yet clear whether the Ministry of Finance and the Office of the Superintendent of Financial Institutions will introduce separate proposed rules.

“We think that there is still a gap for what the banks need to do to effectively issue their own stablecoins,” he said.

Mr. Emerson said despite remaining gaps, he views the draft rules as a “good sign.”

“We have legislation. Do I think it’s perfect? No, but I think that they are being very strategic.”