Canada has opened a 60-day public consultation on proposed stablecoin regulations that would require non-bank issuers to
register with the Bank of Canada,
maintain fully backed reserves, and
redeem tokens at face value,
as the country prepares to establish a comprehensive framework for digital payments.
The proposed rules, published in the Canada Gazette on October 24 2026, would require issuers to
hold reserve assets denominated in the currency backing their stablecoins,
offer redemption at a one-to-one rate, and
return funds within three business days of a redemption request.
Redemption fees would be capped at 1% of the amount redeemed with issuers required to disclose fees and give holders at least seven days’ notice before fee increases.
The consultation closes on December 23 2026 with the government targeting implementation in fall 2027. The framework follows the passage of Canada’s Stablecoin Act in March 2026 and comes as jurisdictions, including the United States under its GENIUS Act, develop rules for fiat-backed digital currencies.
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Ottawa says the proposed regulations address risks arising from inadequate reserves, issuer insolvency, weak risk management, and the exposure of sensitive financial information. They would also prohibit issuers from paying interest or yield simply for holding stablecoins although transaction-based rewards would be permitted.
Issuers would be barred from marketing tokens as legal tender, bank deposits, or products covered by government deposit insurance.
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Balancing Consumer Protection with Competition
The proposed framework seeks to make stablecoins more reliable for payments and cross-border transfers without allowing consumers to mistake them for government-guaranteed money. The government is also seeking to limit the risk of runs and de-pegging events that could undermine confidence in digital payments.
However, the rules raise questions about how smaller Canadian issuers can compete with established international stablecoin providers. Ottawa acknowledges that smaller operators may face higher per-unit redemption costs which is one reason the proposed fee ceiling is set at 1% despite redemption fees in the existing market generally reaching around 0.1%.
The consultation also highlights concerns about overlapping federal and provincial oversight, the treatment of financial institutions, and the ability of foreign issuers to qualify under Canada’s framework. The government says it wants consistent rules that reduce regulatory duplication and regulatory arbitrage while allowing exemptions where other jurisdictions have substantially similar regimes.
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How the Framework Could be Refined
Stakeholders have an opportunity to seek clearer rules on
how comparable foreign frameworks will be assessed,
how reserve assets will be protected if an issuer fails, and
how redemption obligations will work during periods of market stress.
The Bank of Canada plans to consult on supervisory guidelines before the regulations take effect.
Consumer protection groups have also called for stronger ways to help users compare stablecoins, including a possible rating system. Ottawa has not proposed mandatory ratings, citing limited international experience and uncertainty about their additional benefits, but the draft would require issuers to establish complaint-handling procedures and publish information about their tokens, policies and redemption terms.
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The proposals would also bring certain payment service providers using stablecoins within the scope of Canada’s Retail Payment Activities Act. The government estimates that about 30 providers not previously covered would face additional requirements involving operational risk management, safeguarding customer funds, and reporting to the Bank of Canada.
The challenge for Ottawa will be to ensure that reserve, redemption, and disclosure requirements are enforceable without creating unnecessary barriers to entry or fragmenting the market across jurisdictions. Clear guidance on foreign-regime recognition, proportionate compliance costs, and effective consumer disclosures could help reconcile those objectives.
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Stay tuned to BitKE on stablecoin regulation globally.
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