Finance Canada published its proposed Canada stablecoin regulations in the Canada Gazette on October 24, and the draft makes two choices the US made differently. Reserves must sit with a custodian incorporated in Canada, which hands the deposit business to Canadian banks and trust companies, and issuers may fund rewards tied to spending a coin but not to holding it. Comments are open for 60 days, and the rules are meant to take effect in fall 2027.
Canada stablecoin regulations hand reserve deposits to local banks
The Stablecoin Act received royal assent in March 2026 and puts issuers that are not banks under the Bank of Canada. Banks, credit unions and insurers that issue coins fall outside it. The draft decides where the money behind a coin can sit. Reserves are limited to demand deposits, government debt maturing within three months, one-day reverse repos and money market funds holding only those assets, and all of it must be held at a “Canadian-incorporated qualified custodian”. Financial institutions not incorporated in Canada are excluded.
Finance Canada says the custodian rule makes redemption easier if an issuer fails. It also means a foreign issuer serving Canadians, such as Circle with USDC, must hold the reserve behind its Canadian float at a Canadian institution unless the Bank of Canada grants an exemption for a “substantially similar” foreign regime. The regulatory impact statement expects five issuers at the start and names QCAD from Stablecorp, CADC from Loon and USDC, so the deposit pool is small today. Each new issuer adds to it at the same short list of domestic banks, which compete with stablecoins for payments and sit outside the Act.
A 1% fee cap and three days to pay
Issuers must redeem at par on request, with no minimum amount, within three business days of the request. Fees are capped at 1% of the amount redeemed, and any increase needs seven days of notice. Finance Canada notes that market redemption fees top out around 0.1%, and says a cap at that level would be too tight for small Canadian issuers, so it set the ceiling ten times higher.
That is generous next to the US. The OCC’s GENIUS Act final rule requires redemption within two business days. A holder cashing out C$10,000 in Canada could pay up to C$100, and the cap stops an issuer raising fees to block an exit during a run, but it leaves room for charges the largest issuers do not levy today.
Supervision is paid for by issuers. Those with C$1 billion or more outstanding pay a C$750,000 base fee plus a share of the Bank of Canada’s remaining costs, while issuers under C$500 million pay C$25,000. Finance Canada puts the annualised cost of the package at C$240,648, and about 30 payment firms handling stablecoins will also come under the Retail Payment Activities Act.
Rewards for spending are allowed
The yield ban goes further than a ban on interest. Issuers may not pay holders for holding a coin, and they may not enter income-sharing deals in which a partner pays holders and the issuer funds it, the structure GL Insight described for OUSD’s reserve split. A reward “tied to only the use and not the holding” of a coin is permitted, even when it is funded through income sharing.
The US reached a looser position by another route. The OCC dropped the presumption that rewards paid by affiliates and partners count as banned yield, as GL Insight covered in its post on the OCC’s final rule. Canada bans holding incentives through partners outright and writes the spending exception into the text. Cash back on stablecoin purchases would pass in Canada, and a payment on idle balances would not, however the money flows. Circle already split its US products into payments and yield for the GENIUS Act, and issuers serving both countries now face regulators drawing lines in different places.
Bottom line
Canada has written stricter custody rules and a looser fee cap than the US, and the custody rule will shape the market more than the fee. Issuers already active in Canada get 30 days after the Act takes effect to apply, and can keep issuing while the Bank of Canada decides. Firms working out where Canada fits in a North American stablecoin plan can talk to GL Insight Advisory, and more stablecoin coverage sits on the GL Insight hub.
Watch for:
- Comments from Circle and the large banks before the window closes around December 23
- Bank of Canada guidance on exempting issuers under foreign regimes
- Whether Finance Canada lowers the 1% cap in the final text
