Canada proposes stablecoin redemption within 3 business days and fees capped at 1%
Key Facts
Canada published a proposal to regulate stablecoins on October 24, requiring issuers to redeem them at the request of any holder within 3 business days and capping redemption fees at 1% of the amount redeemed. The proposal was published in the Canada Gazette under the Stablecoin Act and the Retail Payment Activities Act. The text grants redemption rights to holders regardless of the size of their request, rather than limiting them to retail investors or requiring a minimum amount. Redemption must also be on a one-to-one basis in the stablecoin’s reference currency. The proposal aims to balance holders’ interests with the market’s ability to remain viable, as the government says excessive or punitive fees could undermine confidence in the ability to redeem.
The proposal sets an advance notice period for informing users of any fee change: an issuer must post a notice on its website at least 7 days before it begins charging or increases a redemption fee. The 1% cap reflects a balance between protecting holders and giving issuers operational room. The Canada Gazette says direct redemption fees in the market have generally been about 0.1%, but notes that a cap at that level could be overly restrictive for smaller or emerging issuers. The proposal therefore sets an upper limit on fees while allowing issuers to set lower fees within that limit. The proposed 3-day period remains the framework for completing redemption after a request is submitted.
The text does not guarantee unrestricted daily redemption in all circumstances; it allows an issuer to set a daily cap if a lack of liquidity in reserve-asset markets prevents it from meeting all requests. This exception is tied to the proposal’s reserve requirements, not to a change in the value of the redemption owed to the holder. Each stablecoin must be redeemable one-to-one in its reference currency, and reserves must be denominated in the same currency. The value of reserve assets must also be at least equal to the total value of outstanding stablecoins at the end of each day. This means the full-backing requirement remains in place even when daily redemptions may be distributed because liquidity is insufficient to meet all requests.
The proposal limits eligible reserve assets to demand deposits, short-term government debt, overnight reverse repurchase agreements and money market funds made up entirely of eligible reserve assets. Government debt must have a remaining maturity of 3 months or less when invested. Issuers must deposit the assets with an eligible custodian established in Canada. These assets must also be segregated from reserves backing other stablecoins. The requirements link redeemability to the types of assets backing a coin, where they are held and how they are segregated.
The proposal adds obligations for handling holder complaints and periodic disclosure. An issuer must acknowledge receipt of a complaint within 7 days and work to resolve it within 30 days. Monthly reports must also include information on stablecoins issued to or redeemed from people in Canada, reserve custodians, coin distributors and complaint outcomes. The proposed framework covers domestic and foreign non-financial institution issuers that make fiat-backed stablecoins available to Canadians, while financial institutions subject to prudential regulation are excluded from this stablecoin issuance regime. These obligations show that the proposal addresses issuer oversight and customer complaints alongside redemption and reserve requirements.
The Canada Gazette says Canada currently lacks a comprehensive regulatory framework for issuing stablecoins used across provinces and internationally. The government identifies risks including insufficient redemption reserves, weak risk management, issuer insolvency and data security threats. The proposal follows the registration requirements for payment service providers taking effect in November 2024, then the operational and safeguarding requirements taking effect in September 2025 under the Retail Payment Activities Act. Parliament had passed the Stablecoin Act as part of the 2025 Budget Implementation Act, which received royal assent on March 26, 2026. The government assumes in its cost analysis that the law will initially cover 5 issuers, based on entities currently operating in Canada and potential market entrants.
The government estimates the proposal’s total annual cost at 88,521 Canadian dollars, averaging 17,704 dollars per regulated issuer annually over 10 years. The proposal targets the regulations taking effect in fall 2027 alongside the Stablecoin Act, with the Governor in Council to set the final effective date by order. Until then, the proposed requirements will not be in force. The government has opened a 60-day period from the publication date for interested parties to submit comments. This phase will precede the final wording and implementation date.