Canada’s Draft Stablecoin Rules Would Allow Spending Rewards, Bar Holding Yield
Canada’s proposed stablecoin rules distinguish rewards earned through a payment from yield paid for keeping tokens in a wallet. That does not mean every cashback programme gets a green light. The draft’s wording, the programme’s terms and how rewards are funded would all matter.
- Transaction-linked rewards could fall outside the ban on holding yield.
- Issuer arrangements supporting third-party yield could still be covered.
- The proposal also sets out reserve, custody and redemption requirements.
- The rules are not final, and no specific rewards product is approved.
Spending rewards are not the same as holding yield
Published in the Canada Gazette on October 24, 2026, the draft regulations distinguish between a benefit earned when a stablecoin transaction takes place and a return paid for holding a balance over time. That distinction echoes Canada’s proposed allowance for stablecoin spending rewards.
Under proposed Section 14(1), a payment or reward tied to a stablecoin transaction, rather than to holding the token, would not count as interest or yield under the Stablecoin Act. A purchase rebate could qualify, but calling it a rebate would not settle the matter. The programme’s conditions and funding arrangements would matter too.
Section 14(2) would cover certain issuer arrangements that provide holding-based yield through another party or encourage another party to pay it. An app paying out rewards would not automatically shield the issuer if the issuer’s arrangement supports those payments. A similar dispute over stablecoin rewards has drawn criticism from the White House crypto advisor.
Mixed programmes are harder to assess. A purchase reward could raise different questions if users also have to maintain a minimum balance to qualify. The draft does not say that every transaction-linked promotion is permitted or that every third-party reward is prohibited.
Reserve backing and redemption rules
The proposal would require reserve assets to have a market value at least equal to the par value of outstanding tokens at the end of each day. Par value is the stablecoin’s stated redemption value. It may differ from the price the token trades at on an exchange.
Qualified custodians would have to hold the reserve assets. Those custodians must be financial institutions domiciled in Canada, and the assets must remain separate from the issuer’s and custodian’s own property. The Finance Department says issuers would report to the Bank of Canada monthly, with an accountant’s opinion on the value and composition of outstanding coins and reserves. These custody arrangements also bring operational security into focus.
The draft would generally require issuers to redeem tokens within three business days of a holder’s request. It would also allow daily redemption limits in specified circumstances where liquidity is insufficient in the markets where reserve assets trade. Issuers would have to explain the circumstances and payment methods in a published redemption policy.
The proposed fee cap is 1% of the redeemed value. For a C$1, 000 redemption, the maximum fee would be C$10. Issuers would not have to charge a fee. They would have to give at least seven days’ notice before introducing one or increasing it.
Daily reserve coverage does not guarantee immediate access to cash. A token could trade below its stated value on an exchange even if its issuer promises redemption at par. Holders could still face eligibility requirements, fees, delays or permitted redemption limits.
Which issuers and payment providers could be covered?
Some foreign non-financial issuers that make fiat-backed stablecoins available to people in Canada, directly or indirectly, could fall under the federal issuer framework. The draft allows for possible exemptions if another jurisdiction’s regime is considered substantially similar, subject to a process and conditions. It does not name any foreign regimes that have been accepted.
Proposed amendments to the Retail Payment Activities Regulations would bring certain payment-service providers handling prescribed stablecoins under the retail-payment oversight system. These are separate requirements. Stablecoin issuers would face registration and supervision under the proposed federal framework, while qualifying payment-service providers could be covered by the retail-payment rules.
The draft would also bar issuers from marketing a stablecoin as legal tender, a deposit, publicly insured or government-backed. Existing distribution or custody arrangements would not, on their own, count as registration under the proposed federal system. Calling a token “Canadian compliant” before its issuer is registered could blur that distinction.
Consultation remains open
The proposed rules are open for comment until December 23, 2026, at 11:59 p.m. Eastern time. The consultation period lasts 60 days, and the final regulations may differ from the draft. The wider US debate over stablecoin rewards has also seen clashes between Trump and US banks.
The practical test will be how the final rules distinguish a genuine transaction reward from a payment effectively tied to maintaining a balance. A merchant discount, a wallet promotion and an issuer-funded holding reward may look similar to customers, but their terms and funding can differ sharply.
For now, the proposal offers a framework for drawing that line, not a compliance shortcut for any particular product. Issuers, platforms and payment providers will need to review the final text and the details of their own arrangements before treating a rewards programme as permitted. The US policy dispute continues, with the White House setting a deadline for crypto legislation amid the stablecoin rewards clash.
Key questions about Canada’s proposed stablecoin rules
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Could customers earn rewards for spending stablecoins?
The draft would place rewards tied to a transaction, rather than to holding the token, outside the Act’s interest-or-yield category. Whether a specific programme qualifies depends on its terms and funding.
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Could users earn yield just for holding stablecoins?
The proposal would keep the Stablecoin Act’s ban on issuer-paid yield for holding tokens.
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Could an issuer route holding yield through an app?
Not necessarily. Section 14(2) would cover certain issuer arrangements that support or encourage another party to pay yield to holders.
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Who could fall under the proposed framework?
It could cover stablecoin issuers within scope, including some foreign non-financial issuers serving people in Canada. Certain payment-service providers handling prescribed stablecoins could separately face retail-payment oversight.
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How quickly would an issuer have to redeem tokens?
The proposed general deadline is three business days after a holder’s request. Daily limits could apply in specified circumstances where liquidity in reserve-asset markets is insufficient.
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What is the proposed redemption-fee cap?
The cap is 1% of the redeemed value. It is a ceiling, not a fee every issuer must charge.
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When does the consultation close?
December 23, 2026, at 11:59 p.m. Eastern time. The regulations remain a proposal until they are finalized.
