Canada Bans Interest Payments on Stablecoins and Mandates 1:1 Reserve Requirements

The Canadian government has announced a regulatory proposal that prohibits stablecoin issuers from paying interest and requires them to hold reserves corresponding to their circulating supply. This proposal includes detailed criteria for the implementation of the Stablecoin Act and has initiated a 60-day public consultation period, with a deadline for comments set for December 23. According to the proposal, stablecoin issuers are prohibited from paying interest, although transaction-related rewards are permitted. The Canadian banking sector has expressed concerns that interest payments could lead to bank deposit outflows. Non-bank stablecoin issuers must hold reserves equal to the value of their circulating fiat currency-linked tokens, and these reserves must be deposited with eligible Canadian financial institutions. Users can redeem stablecoins for fiat currency within three business days, with redemption fees capped at 1%. Issuers must register with the Bank of Canada, and the related regulations are expected to come into effect by the end of next year.

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