Canada’s Draft Stablecoin Rules Uphold Ban on Yield Payments

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The regulations uphold a ban on yield payments and require nonbank issuers to keep their reserves with Canadian financial institutions, the report said.

The consultation, which ends Dec. 23, is happening as Canadian banks lobby for a prohibition on yield payouts, according to the report. The banking industry is echoing concerns voiced by their counterparts in the United States that customers could pull their money from bank accounts, hindering lending for traditional financial institutions.

The Canadian government passed its Stablecoin Act (SCA) earlier this year, and the draft regulations are “required to bring the SCA into force and would prescribe the elements needed for issuers to register with the Bank of Canada,” the government said, per the report.

Some Canadian cryptocurrency exchanges are already paying rewards to stablecoin holders. For example, Coinbase Canada received permission this year from the Ontario Securities Commission to offer yields on eligible tokens, as long as it advised customers about the risks and warned them funds are not protected by deposit insurance, the report said.

Meanwhile, U.S. banks are facing renewed competition from digital assets companies for customers’ cash. Federal regulators left room for crypto platforms to provide stablecoin rewards, “setting up a contest over returns that could affect the cost and availability of bank loans,” PYMNTS reported Thursday (Oct. 22).

Days earlier, the Office of the Comptroller of the Currency finalized regulations under the GENIUS Act, creating standards for the stablecoin issuers it supervises. Effective Jan. 18, 2027, the rules address the assets backing these coins, customers’ ability to exchange them for money, safekeeping and risk management.

The dispute centers on the distinction between who creates stablecoins and who distributes them. Issuers are barred from paying interest or returns solely for holding, using or retaining their coins. However, the OCC stopped short of imposing an outright restriction on arrangements involving third-party platforms.

That leaves an opening for rewards, and the OCC will examine individual arrangements.

“Its final rule also says existing rewards programs won’t automatically be considered compliant simply because they predate the law,” PYMNTS reported. “Platforms therefore haven’t received unrestricted permission to continue every offering.”