Canada proposes stablecoin redemptions within 3 days and a 1% fee cap
Key Facts
On October 24, 2026, Canada published draft federal regulations for fiat-backed stablecoins, requiring issuers to complete redemption within 3 business days of a request by any holder, regardless of the request amount, at a price equal to the face value in the reference currency. The proposal caps redemption fees at 1% of the amount and opens a 60-day public comment period ending on December 23, 2026, at 11:59 p.m. Eastern Time. It sets out issuer obligations for reserves, redemption and disclosure under rules required to bring the Stablecoin Act into force. The government says the framework is intended to establish requirements for registering issuers and monitoring them at the Bank of Canada. The proposal is a regulatory step in a market where authorities are seeking to distinguish stablecoins issued by non-bank entities from tokenized deposits being explored by banks.
The proposed fee cap reflects a balance the government says is necessary between protecting holders and keeping the market open to smaller or newer issuers. According to the Canada Gazette, fees in the current market have generally reached levels of about 0.1%, and the government considered that setting the cap at this level could restrict those entities’ entry. It therefore concluded that a 1% cap provides a reasonable upper limit, while requiring issuers to notify holders at least 7 days before imposing redemption fees for the first time or increasing them. The proposal sets the 3-day redemption period in line with settlement cycles for reserve assets, rather than as additional time on top of them. The period allows for settlement of Canadian securities on a T+1 basis and foreign-currency-denominated securities on a T+2 basis. One business day is added for operational processing, including liquidating reserve assets where necessary and initiating the transfer of funds in the reference currency.
The proposal does not make the fulfillment of daily requests absolute in every circumstance: it allows an issuer to limit the value of daily redemptions if insufficient liquidity in reserve-asset markets prevents it from meeting all requests. In return, it requires the market value of reserves to equal or exceed the face value of outstanding coins at the end of each day. An issuer may withdraw returns generated by those assets as long as the coverage requirement remains satisfied after the withdrawal. The rules limit eligible assets to demand deposits, government debt with no more than 3 months remaining to maturity at the time of investment, and overnight reverse repurchase agreements. They also include money market funds composed entirely of eligible reserve assets. The framework proposes banning returns linked solely to holding the coin, while exempting transaction-linked rewards if they are not tied to holding it.
The proposal requires issuers to follow a defined process for handling holder complaints, with acknowledgment of receipt within 7 days and resolution within 30 days of receipt. The rules also require monthly reports to the Bank of Canada to include the number of coins issued to people in Canada and those redeemed from them. Disclosures include the names of reserve custodians and third parties that facilitate purchases of the coins, as well as a summary of resolved complaints and their outcomes. The Stablecoin Act covers domestic and foreign issuers not subject to prudential regulation, and does not regulate banks, trust and insurance companies, credit unions or foreign financial institutions as coin issuers. But amendments related to the Retail Payment Activities Act bring payment service providers that perform payment functions using stablecoins within the scope of that law. The Bank of Canada oversees non-financial issuers, including registration, compliance monitoring, and issuance and redemption risks.
The rules come as Canadian banks explore a parallel path for tokenized money. Canada’s largest 6 banks said in late September that they were exploring a tokenized Canadian dollar system to speed the movement of money among traditional financial institutions. In a statement issued on September 10, the Office of the Superintendent of Financial Institutions Canada described tokenized deposits as "not legally distinct from traditional deposits." This path differs from the stablecoin proposal, which targets non-bank issuers, while payment service providers using stablecoins may be subject to rules under the Retail Payments Act. The Stablecoin Act received royal assent in March 2026, and the government says the proposed regulations are necessary to bring it into force and set registration requirements at the Bank of Canada. The government estimates the total annual cost to issuers at about 88,521 Canadian dollars, including 28,317 dollars in administrative costs and 60,204 dollars in compliance costs, averaging 17,704 dollars per regulated issuer annually over 10 years.
The government intends to bring the regulations into force in fall 2027 alongside the Stablecoin Act, with an order of the Governor in Council setting the effective date. After the rules take effect, non-financial issuers will have to apply for registration with the Bank of Canada before issuing a stablecoin. The proposal remains in public consultation until December 23, 2026, at 11:59 p.m. Eastern Time. The proposed framework combines reserve, redemption and disclosure conditions with central bank oversight of issuers. It also gives issuers a timeframe to prepare for registration and compliance requirements ahead of the targeted implementation date.