Canada Proposes 1% Stablecoin Redemption Fee Cap

Stablecoin redemption cap has a liquidity exception

Section 15 would require redemption on request regardless of the amount, cap fees at 1% and set the three-business-day window. The percentage is a ceiling, not a required charge: a holder redeeming 1,000 units could face at most 10 units in issuer redemption fees under that provision.

But the draft permits daily redemption limits when insufficient liquidity in reserve-asset markets prevents an issuer from meeting every request. A published timetable therefore should not be read as unconditional access during market stress.

That distinction separates a token transfer from cash conversion. Sending a stablecoin between wallets can leave the recipient holding the same issuer claim; redemption requires the issuer to deliver the reference currency through the banking system.

Canada’s approach also differs from the Federal Reserve’s proposed two-business-day redemption standard, which has its own exceptions and supervisory scope. Comparing the headline day counts alone leaves out the conditions governing payment.

Canada keeps issuer yield ban and transaction rewards

The proposal preserves the prohibition on issuer-funded returns for holding stablecoins, including indirect arrangements with other parties. CoinDesk’s October 26 report describes the same policy distinction: rewards linked to transactions can remain permitted.

The distinction turns on the incentive. Paying someone to keep a balance resembles savings interest; rewarding a transaction encourages use. The draft’s indirect-payment language means routing a holding reward through another business would not automatically remove it from the restriction.

This is an issuer-focused rule. A product advertised by a trading platform still requires examination of who funds the reward, what activity qualifies and which regulatory permissions apply. The consultation does not itself settle every exchange promotion’s status.

Finance Canada’s framework explanation covers domestic and foreign non-financial institution issuers making fiat-backed tokens available to Canadians. It includes foreign-currency stablecoins, rather than only Canadian-dollar products.

The framework calls for at least one-to-one backing in the reference currency and redemption at par. Its structure separates issuer supervision from securities regulation of trading platforms and oversight of payment activities. Compliance at one layer does not answer every question at another.

The draft would also require reserve assets to sit with Canadian-incorporated qualified custodians. That locates an important part of the redemption infrastructure inside Canada even when a token references a foreign currency. It does not turn the token into a government-backed deposit.

An issuer’s reserve and a holder’s redemption request answer different questions. Full backing describes assets supporting the outstanding tokens; a cash-out deadline describes the process for delivering money. The liquidity exception is relevant precisely when converting those assets into cash becomes difficult.

That division complements Canada’s earlier digital-asset custody framework, which addresses trading-platform custody. Holding customer crypto securely and maintaining assets behind a stablecoin are related safeguards, but they apply to different obligations.

Stablecoin consultation closes December 23

The 60-day comment period ends December 23 at 11:59 p.m. EST. Decrypt’s report on the draft notes the intended fall 2027 start and proposed penalties reaching C$10 million for very serious violations. Implementation remains subject to the final process.

The banking comparison also needs care. In its September 10 statement, OSFI said tokenized deposits are not legally distinct from traditional deposits. A blockchain record does not by itself put a stablecoin and a bank deposit in the same legal category.

For businesses considering digital payments, the relevant distinction is the claim they hold and the process for converting it into spendable bank money. Wallet speed alone cannot establish redemption liquidity, legal protection or the cost of exiting a token.

Alternative.me’s Bitcoin-focused sentiment index read 48, or Neutral, on October 27, versus 50 a day earlier. It measures broader market sentiment rather than Canadian stablecoin demand.

The next substantive milestones are consultation responses, final regulations and supervisory guidance. The fee cap, liquidity exception and treatment of rewards remain proposed operating terms; no issuer approvals or immediate product withdrawals follow from publication alone.