Canadian authorities have unveiled draft regulations that would grant stablecoin holders the ability to redeem any amount directly from issuers without a minimum threshold. The new rules set a maximum fee of 1% and are scheduled to take effect in the fall of 2027, pending a 60-day public consultation period.
Stablecoin Redemption Details
The draft rules, published on October 24, are designed to add operational clarity to the Stablecoin Act, which received royal assent in March. Although parts of the Act have not yet come into force, the proposed guidelines would require issuers to complete redemption requests within three business days. This timeframe is intended to allow issuers adequate time to settle reserve securities and handle processing related to the redemption.
Under the proposal, issuers would be prohibited from rejecting a legitimate redemption request on the grounds of a small balance. Holders would be entitled to redeem any amount at the stablecoin’s face value in its pegged currency. For example, a USDC redemption would be made in U.S. dollars; Canadian residents seeking Canadian dollars would need to use a separate conversion process.
The proposed 1% fee cap is intended as a maximum rather than a default rate. Issuers would be required to provide at least seven days’ notice on their website before introducing or increasing any redemption fees.
The Act would require issuers to pay at par in the underlying currency, while limiting fees to a maximum of 1%, with timely completion of redemptions.
If reserve-asset markets experience a liquidity shortfall, issuers could temporarily set daily redemption limits. However, the 1% cap on fees would remain in effect during such periods.
Guidelines for Stablecoin Issuers
To support these redemption obligations, reserves must at all times equal or exceed the total value of outstanding stablecoins. Permissible reserve assets include demand deposits, short-term government debt, qualifying money-market funds, and eligible overnight repurchase agreements.
Additionally, reserves are to be kept separate from obligations owed to an issuer’s or custodian’s creditors. Issuers are not permitted to claim their stablecoins represent insured bank deposits in any manner.
Mini dictionary: Overnight repurchase agreements, often called “overnight repos,” are short-term borrowing arrangements typically involving government securities. Financial institutions use these agreements to access temporary liquidity by selling securities to other parties with a promise to repurchase them the next day.
Circle’s USDC Redemption Policy and Applicability
Circle, issuer of the USDC stablecoin, currently limits direct redemption to entities holding a Circle Mint account, which predominantly serves institutions and registered distributors. Updated terms, effective October 15, require these account holders to pass identity and sanctions checks and to connect a verified bank account in their name. Individual users utilizing USDC for personal purposes cannot directly redeem through Circle Mint.
The applicability of Canada’s proposed rules to USDC remains to be determined. The Act is intended to cover both domestic and foreign stablecoin issuers whose tokens are available to Canadian buyers, based on the residency or business location of the purchaser. The Bank of Canada’s Governor retains the authority to exempt certain issuers if equivalent regulations exist elsewhere.
Initial registration relief is available for existing issuers that apply within 30 days of the rules’ start date, allowing continued issuance while registration requests are underway. This exemption does not suspend redemption obligations during the review process.
| Policy Aspect | Canada’s Proposed Rules | Circle’s Current Policy |
|---|---|---|
| Direct Redemption | Permitted for any holder, no minimum | Institutions with Circle Mint account only |
| Redemption Fee | Max 1% | Determined by Circle, not capped by regulation |
| Processing Time | 3 business days | Dependent on Circle Mint account status |
The public consultation on these draft rules continues for 60 days following the October 24 release. The government expects the new stablecoin regulations to enter into force in fall 2027.
Issuers will have to maintain fully backed reserves and provide clear redemption terms for all covered holders, with oversight carved out for exemptions in cases where foreign rules closely match Canadian requirements.
