Canada’s draft stablecoin rules shut out yield and route reserves through the banks

Canada has watched Washington move first: the US GENIUS Act, signed in 2025, set federal reserve and disclosure rules for dollar-pegged tokens and pushed issuers like Circle and Tether toward compliance regimes. Ottawa's draft answers that shift under its own Retail Payment Activities framework, folding stablecoins into the same supervisory structure that already governs payment firms, rather than leaving them in a regulatory gap the way Terra's 2022 collapse exposed.

Non-bank issuers now have to park reserves inside Canadian banks and qualified custodians, hold only high-quality liquid assets, and process redemptions within three business days at a fee capped at 1%. Banks gain a gatekeeping role over competitors' balance sheets, while issuers lose the option to pay interest directly to holders, even as they can still offer transaction-based rewards. Retail holders get faster, cheaper redemption guarantees but no yield on parked stablecoin balances.

Routing reserves through the same banks that lobbied for the yield ban blurs the line between regulating stablecoins and protecting bank deposit funding from competition. Clarity on reserves and redemption timelines is a genuine gain for consumer protection, but a framework that makes banks custodians of rival products raises a fair question about whose interests the rules ultimately serve. Crypto Briefing's own framing — clarity against limited innovation — captures that trade-off without resolving it.

The consultation runs until December 23, and the Department of Finance's final version, published after that window closes, will show whether the 1% fee cap, the three-day redemption rule, and the bank-custody requirement survive industry pushback. Any softening of the yield ban, or exemptions carved out for qualified institutions, would mark the clearest signal of how much leverage non-bank issuers retain once the draft becomes binding law.

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The move was larger before the first headline than after. That is an observation, not an explanation: the market also moves on things nobody publishes.