- Canada proposes stablecoin rules requiring fully backed reserves and local custodians.
- Stablecoin issuers would face three-day redemption rules and fees capped at 1%.
- Bank of Canada oversight would include monthly reports and penalties of up to $10M.
Canada has proposed regulations that would require stablecoin issuers to maintain fully backed reserves, initiate redemption transfers within three business days, and register with the Bank of Canada. The measures would be backed by the Stablecoin Act, which received royal assent in March 2026.
Domestic and foreign nonbank issuers would be covered. They would also bring certain stablecoin payment services under federal oversight, expanding safeguards for Canadians who use digital tokens for payments.
Canada Issuers Face Reserve and Redemption Requirements
Under the proposal, issuers would need reserves of at least the value of their outstanding stablecoins at the end of each day. Eligible holdings would include cash, short-term government debt, certain overnight repurchase agreements, and qualifying money market funds.
Those assets would have to remain separate from an issuer’s other holdings and be held by a qualified custodian incorporated in Canada. The segregation requirements are intended to preserve reserve assets for holders if an issuer or custodian becomes insolvent.
Alongside those protections, issuers would have to redeem tokens at face value in the reference currency, without imposing minimum redemption amounts. Redemption fees would be capped at 1%, and customers would receive at least seven days’ notice before any fee increase.
The proposal would also bar issuers from paying interest or yield simply for holding stablecoins. Marketing could not portray the tokens as legal tender, insured deposits, or government-guaranteed products.
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Bank of Canada Oversight Intends to Expand
To obtain registration, issuers would have to disclose how tokens are created, how reserves are managed, and which third parties support their operations. They would also submit monthly reserve reports incorporating an accountant’s opinion.
Meanwhile, the finance minister could review applicants for national security risks and direct the central bank to refuse registration. Proposed penalties would reach $1 million for serious violations and $10 million for very serious ones, including failures involving reserves or redemption.
The changes would extend beyond issuers. Amendments to the Retail Payment Activities Regulations would cover eligible payment service providers handling prescribed stablecoins, including custodial wallets. Such providers would face requirements to safeguard customer assets, manage operational risks, and prepare for issuer insolvency.
Existing issuers would receive a transitional pathway, provided they apply for registration within 30 days of the Stablecoin Act’s effective date. Until the proposed regulations are finalized and the relevant provisions enter into force, the new obligations would remain prospective.
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Related: ESMA Sets Firm MiCA Compliance Deadline for Stablecoins in the EU
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