Canada's draft stablecoin rules ban interest for holding coins but allow rewards for spending, with fines of up to C$10 million

Canada's Department of Finance has published draft regulations that would set the day-to-day rules for stablecoin issuers under the framework for fiat-backed coins. The draft appeared in the Canada Gazette on October 24 and is open for comment for 60 days.

The rules would bar issuers from paying interest or yield tied to holding a stablecoin, and from arrangements that encourage people to hold more or hold longer. Rewards tied to using a coin, such as a rebate on a purchase, would be permitted, crypto.news reported.

Holders would be able to redeem one for one in the reference currency, with no minimum amount, within three business days of asking. Redemption fees would be capped at 1% of the amount, and any fee increase would need at least seven days' notice. Reserves would have to be worth at least as much as the coins outstanding at the end of each day, held in a segregated account at a Canadian-incorporated custodian, in assets such as deposits, short-dated government debt and eligible money market funds.

Violations would be classed as serious or very serious, with penalties of up to C$1 million for serious violations and up to C$10 million for very serious ones. Failing to keep adequate reserves or redeem at par would be very serious.

Comments are due by December 23. The Finance Department will then decide on final rules, which crypto.news said may differ from the draft.