Canada’s Department of Finance has published draft Stablecoin Regulations that spell out where a permitted reward ends and a banned yield begins: payments linked to using a stablecoin would be allowed, while arrangements that pay people for holding one, including through third parties, would not.

The proposal appeared in the Canada Gazette on Oct. 24, starting a 60-day comment period that runs to Dec. 23. The regulations are needed to bring the Stablecoin Act into force. That law received royal assent in March 2026 and already contains a ban on issuers paying interest or yield on held coins.

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Where Rewards End and Yield Begins

Under the draft, a payment or reward linked to a stablecoin transaction, and not to holding the coin, would not count as interest or yield. A reward “tied to only the use and not the holding of a stablecoin” is allowed “to encourage adoption of the stablecoin,” the department wrote in its analysis of the rules.

The draft also reaches beyond the issuer itself. A deal between an issuer and any other party, holder or not, would count as indirect yield if it lets that party earn a return from holding the issuer’s coin, income sharing included, or if it prompts that party to pay holders a return.

Finance said in the Gazette notice that it wants to keep stablecoins apart from products that “compete directly with bank deposits or other interest-bearing instruments,” and to stop issuers from passing reserve income, such as interest on short-term government debt, to holders. Fintechs and financial institutions both called yield an important part of the framework, according to the department, which said it reached its position after several rounds of consultation.

Redemption and Reserves

Holders could redeem at par with no minimum amount. Issuers would have three business days to complete a redemption, with fees capped at 1% of the amount redeemed, though they could limit daily redemptions if a liquidity shortfall in the markets for their reserve assets left them unable to meet every request. Finance said it settled on 1% even though redemption fees in today’s market run to roughly 0.1%, arguing a ceiling set at current levels would be too tight for newer and smaller issuers.

Reserves would have to match at least the value of outstanding coins at the close of each day, held in cash and demand deposits, government debt maturing within three months, overnight reverse repos, or money market funds holding only those assets. Custodians would have to be financial institutions incorporated in Canada. Issuers could keep returns earned on reserves as long as backing stays at least one-to-one.

Next Steps

Finance intends the rules to take effect in fall 2027, alongside the act. The Bank of Canada, which will register and supervise issuers, plans to put out guidelines for consultation once the final rules are published. Issuers already operating would get 30 days after the act takes effect to apply for registration or stop issuing.

Finance’s cost analysis assumes five issuers would fall under the act. The current players it cites include Stablecorp’s QCAD, Loon Technology’s CADC and Circle’s USDC, and it expects others to enter once the framework is in place. Penalties could reach C$10 million for a very serious violation.

Related Listen: Why Banks Failed to Kill Stablecoin Rewards in the Clarity Act