Under Canada's proposed new rules, if you hold a stablecoin for a year, its issuer cannot pay you interest just for holding it; but if you spend it in a store, you might get a reward.

But what if the reward increases as the balance in your wallet grows?

This is a scenario I made up, not a real product. But it is exactly the question Canada's draft has to answer, because the whole design rests on a distinction: whether you are paid for "using" it or for "holding" it. The draft was published on October 24 under Canada's new (Stablecoin Act), with public comments open until December 23. I read the text of the provisions and the government's original explanatory note in the (Canada Gazette).

【The takeaway】

· Draft section 14(1): Payments or rewards linked to transactions, but not to holding, do not count as interest.

· Paying interest indirectly through a partner “revenue-sharing” arrangement is also prohibited.

· Redemption: within three business days, with fees no greater than 1%—but if market liquidity is insufficient, the issuer may limit the amount redeemed each day.

【Where the line is drawn】

Section 14(1) says: “Payments or rewards linked to stablecoin transactions, but not to holding, do not constitute interest or a yield.”

The government’s explanatory notes say the ban targets interest arrangements that “encourage holders to hold more, or for longer”; rewards linked only to “use,” and not to “holding,” may be used to encourage people to use the stablecoin.

My take: The test isn’t what it’s called, but what it rewards—keeping a balance or spending. If the reward grows with the balance, it leans more toward “holding.” How the final rules will treat this kind of hybrid design is still unsettled; the draft sets out a test, not a ruling on every product.

【Closing the partner loophole too】

Section 14(2): An arrangement between an issuer and another party (a partner, platform, or wallet) counts as indirect interest if it lets that party earn money from “holding,” including through revenue sharing, or encourages the party to pay interest to holders.

The government’s rationale: to distinguish stablecoins from “financial products that compete directly with bank deposits.” An issuer’s reserves may be held in interest-bearing assets such as short-term government bonds, but the draft does not allow that income to be passed on to holders.

My take: Hong Kong has faced the same question: how do you distinguish “rewards for use” from “returns for holding”? Hong Kong’s rules prohibit interest payments, while regulatory guidance treats marketing incentives that do not constitute interest separately. Canada puts the test directly into the legislation.

【Can you get your money back?】

A reward gives you a reason to use it; being able to get your money back gives you a reason to trust it.

Section 15(1): The issuer must redeem on demand, “regardless of the amount,” within “three business days,” with redemption fees capped at 1% of the amount.

One provision is worth reading twice: under section 15(2), if the market for the reserve assets has “insufficient liquidity” to meet all redemption requests, the issuer “may limit the amount redeemed each day.”

My take: On ordinary days, three business days and a maximum 1% fee; on bad market days, things can move more slowly. The text is clear, and it’s worth knowing before deciding how much money to put in your wallet.

Would you keep some everyday spending money in a stablecoin wallet ahead of time, or convert only when you’re ready to pay? What would determine your choice? Share your thoughts in the comments.

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Note: The above is a draft, scheduled to take effect in fall 2027 alongside the (Stablecoin Act). The government explains that the three-business-day period reflects the settlement time for reserve assets plus one day for processing; redemption fees in the market are generally around 0.1%, with 1% set as a ceiling to leave room for smaller issuers. Any fee increase must be announced on the issuer’s website at least seven days in advance. This article discusses only what the public documents say and is not investment advice.

Sources: (Canada Gazette), Part I, Vol. 160, No. 43 (2026-10-24), draft (Stablecoin Regulations) and Regulatory Impact Analysis Statement, sections 14 and 15 (archived 2026-10-27); CoinDesk (2026-10-26). Quotations from the provisions are translated by the author.