Canada Opens Stablecoin Consultation, Cites US GENIUS Act

Canada's Department of Finance opened a 60-day public consultation on October 24, 2026, on draft rules that would require non-bank stablecoin issuers to back every token with reserves held in Canada and redeem holders' funds within three business days. The draft explicitly points to the United States' GENIUS Act and the Office of the Comptroller of the Currency's newly finalized rule as benchmarks, a sign Ottawa wants its framework to interoperate with the US system rather than compete against it.

What the draft actually requires

Canada's Department of Finance has published draft regulations under its Stablecoin Act, opening a 60 day consultation that runs until December 23, with the rules expected to take effect in fall 2027 and requiring non-bank stablecoin issuers to register with the Bank of Canada, maintain fully backed reserves and submit monthly accountant-verified reports. The proposed framework would require nonbank issuers to maintain reserves equal to their circulating tokens at qualified Canadian financial institutions and redeem stablecoins within three business days, with fees capped at 1%.

On yield, the draft keeps a hard line: issuers cannot pay yield on holdings, but transaction-based rewards remain permitted under the draft. Canada's yield ban goes beyond the issuer-level prohibition in the US GENIUS Act by targeting income-sharing arrangements between issuers and third parties. That distinction matters for any exchange or wallet provider that might otherwise route a cut of reserve income back to token holders through a side agreement.

The scope is broader than a Canadian-dollar product rule. Foreign non-financial issuers serving Canadians fall within the framework regardless of their stablecoin's reference currency, and the Finance Department's framework overview says the rules cover domestic and foreign non-financial issuers that make fiat-backed stablecoins available to Canadians, directly or indirectly, without distinguishing between tokens denominated in Canadian dollars and those referencing foreign currencies. That would pull a dollar-pegged token such as Tether's USDT or Circle's USDC into Canadian registration requirements if made available to Canadian users, not only Canadian-issued tokens.

Enforcement carries real penalties. Penalties run up to C$10 million for very serious violations, with the Bank of Canada supervising issuers. The proposed framework cited efforts to be consistent with stablecoin regulations in the United States and other jurisdictions, to "reduce the overall regulatory burden on multi-jurisdictional issuers," with the government stating the intention is for the proposed regulations to come into force in fall 2027.

Why the yield ban is the real fight

The ban on paying interest to token holders is the provision drawing the most organized pushback and defense, not a minor technical detail. The consultation, which ends Dec. 23, comes as the country's banking industry presses for a ban on yield payouts, echoing concerns voiced in the U.S. that customers could move their money out of bank accounts, leaving traditional financial institutions with less to lend. That is an attributed industry position, not a Finance Department finding, and the consultation period exists specifically so fintechs, exchanges and other stakeholders can argue the opposite case before the rules are finalized.

How this lines up with the US GENIUS Act

Canada's timeline trails Washington's by roughly a year, and the two frameworks differ on redemption speed even though both rest on the same reserve-backing principle. The proposed OCC rules originally would have automatically extended redemption to seven calendar days when requests exceeded 10% of outstanding issuance in 24 hours, but the final rules eliminate that automatic extension, instead requiring issuers to notify the OCC within 24 hours and request an extension if needed, while keeping a two-business-day ceiling that starts once a redemption order is received and the customer is onboarded. Canada's draft sets a three-business-day ceiling, one day longer than the finalized US standard, alongside a 1% fee cap that has no identical counterpart in the US rule.

The GENIUS Act, which establishes a regulatory framework for stablecoins in the US, is scheduled to take effect in January 2027, while the European Union's Markets in Crypto Assets regulation could give exchanges until January to halt services for stablecoins not in compliance with the framework, likely including Tether's USDt, the largest stablecoin by market capitalization. Canada's fall 2027 target would put its regime roughly nine months behind the US compliance deadline, meaning issuers operating in both markets will need to meet the stricter US two-day redemption window well before Canadian registration opens.

What's still unresolved

The Finance Department has published a draft, not a final rule, and the comment window runs through December 23. Nothing in the available record confirms how many submissions the government has received, whether the Canadian Bankers Association's position on yield will prevail over objections from exchanges or wallet providers, or whether the fall 2027 target will hold once the text is revised and finalized. The OCC's own process is instructive: its earlier proposal on automatic redemption extensions was changed in the final rule after industry comment, so Canada's draft terms are a starting point for negotiation rather than a locked outcome.

Readers holding or considering stablecoins should not treat either framework as deposit insurance. Both regimes require disclosures stating the tokens are not legal tender, bank deposits, or government-insured, and reserve backing reduces but does not eliminate the risk of an issuer's operational or custodial failure.