The Canadian government started a 60-day public consultation on draft stablecoin regulations, which maintain a ban on yield payments and require non-bank issuers to deposit their reserves with Canadian financial institutions.

The consultation, which ends Dec. 23, comes as the country's banking industry presses for a ban on yield payouts, echoing concerns voiced in the U.S. that customers could move their money out of bank accounts, leaving traditional financial institutions with less to lend. Natalle Begeron, a spokesperson for the Canadian Bankers Association, told The Logic in June that the group “firmly supports the Stablecoin Act’s explicit prohibition on yield, both direct and indirect.”

The government passed the Stablecoin Act earlier this year. 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.

Some crypto exchanges in Canada, however, are already paying rewards to stablecoin holders. Coinbase Canada received permission from the Ontario Securities Commission (OSC) this year to offer yields on eligible tokens, provided it warned customers about the risks and made clear the funds are not covered by deposit insurance.

The federal fiat-pegged rule proposals would prohibit stablecoin issuers from paying interest, including through third parties, to encourage customers to hold their tokens. It would still allow rewards linked to transactions.

Under the draft rules, non-bank stablecoin issuers would have to hold reserves equal to the value of their circulating fiat-pegged tokens. They would have to place those reserves with qualified Canadian financial institutions, including banks, credit unions and trust companies.

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