10-28-2026 
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TL;DR: Canada has released its proposed stablecoin rules, America’s banking regulator wants community banks to issue their own stablecoins, and a U.S. senator wants answers re Tether’s allegedly under-the-table D.C. lobbying.
Key Takeaways:
- Canada releases stablecoin rules ahead of ‘fall 2027’ implementation
- Banks urge OCC to rethink GENIUS rules, OCC tells banks to join the party
- Blumenthal seeks answers from Tether, Bo Hines re GENIUS activities
Canada’s Department of Finance released its proposed stablecoin regulations on October 24, opening a 60-day comment period for the rules that are slated to take effect in “fall 2027.” The release follows last year’s pledge to amend Canada’s Retail Payment Activities Act to “enable the regulation of payment service providers that carry out payment functions using prescribed stablecoins” and the passage this spring of the Stablecoin Act (SCA).
The government says that, at present, the SCA would apply to five issuers, although the report only namechecks three: QCAD issued by Stablecorp Inc, CADC issued by Loon Technology Inc, and USDC. The latter is a U.S. dollar-denominated token issued by Circle (NASDAQ: CRCL), which is an investor in Stablecorp. Left unmentioned was the CADD token launched this spring by the Alberta-based Tetra Digital Group.
The proposed rules are intended to eliminate risks associated with the current lack of “regulatory requirements and supervisory oversight of stablecoin issuers that have interprovincial and international applications.” Recent surveys showed 10% of Canadian stablecoin users have suffered financial loss due to fraud, scams or hacks.
The rules would prohibit “paying interest or yield tied to the holding of a stablecoin,” whether said payment comes from the token issuer or a third-party platform. Issuers would be barred from entering into arrangements “that result in offering interest or yield in ways that encourage stablecoin holders to hold more of the issuer’s stablecoin, or to hold it for a longer period of time.”
However, “a reward or payment that is tied to only the use and not the holding of a stablecoin, including through income-sharing arrangements, is permitted to encourage adoption of the stablecoin.” The idea is to “maintain a clear distinction” between stablecoins and “financial products that compete directly with bank deposits or other interest-bearing instruments.”
Issuers would be required to process customer redemption requests “within three business days after the initial request and without a minimum redemption amount.” Redemption fees are to be capped at 1% of the amount being redeemed, even as the government acknowledges that current market rates are closer to 0.1%.
While fees above 1% “could discourage the use of stablecoins,” the 1% rate is intended to be “high enough to accommodate cost variability and support market entry, while still low enough to preserve the feasibility of redeeming stablecoins.”
The government believes this rate will provide “sufficient flexibility” for Canadian issuers, whose scale isn’t expected to rival their international counterparts, allowing Canadian issuers to “recover higher per-unit operational costs associated with redemption.”
Issuers will be required to hold reserve assets drawn from a short list of “high-quality liquid assets” like demand deposits, including cash; debt securities with maturation of three months or less; reverse repurchase agreements with a term of one business day (and the debt securities backing them maturing in 90 days or less); and money market funds “composed entirely” of any combination of the above.
Reserve assets can’t be pledged as collateral or otherwise encumbered. They must also be held at a Canadian-incorporated qualified custodian, including banks, credit unions, trust companies, and insurance companies, provided they’re “incorporated or formed by an Act of Parliament or of the legislature of a province.”
Issuers will be required to submit monthly reports to the Bank of Canada that include an opinion by a certified accountant regarding the value of issued tokens, the reserves backing them up, and whether the reserves meet the defined criteria. The Bank of Canada can also require a lawyer to put their name on the line regarding the accuracy of the issuers’ claims.
Issuers who fail to abide by these rules could face financial penalties of up to C$1 million (US$710,000) for ‘serious’ violations or up to C$10 million for ‘very serious’ violations.
OCC to community banks: If you can’t beat ‘em, join ‘em
South of the 49th parallel, the U.S. Treasury Department’s Office of the Comptroller of the Currency’s (OCC) plan to permit certain third-party stablecoin ‘rewards’ unless/until some tangible harm occurs continues to annoy those in the banking sector. The plan was contained in the OCC’s final rules for implementing the stablecoin-focused GENIUS Act that President Donald Trump signed into law last year.
On October 21, the Independent Community Bankers of America (ICBA) issued a statement asking the OCC to reconsider its rules “to minimize the negative impacts of stablecoins on credit to local communities, establish strong consumer-protection and safety-and-soundness guardrails, and place appropriate operational limits on permitted payment stablecoin issuers.”
The ICBA and other banking groups have warned that encouraging third parties like the Coinbase (NASDAQ: COIN) digital asset exchange and decentralized finance (DeFi) platforms to dole out rewards to stablecoin users could cause mass deposit flight by customers seeking higher returns, which in turn would negatively impact community banks’ ability to issue loans to their customers.
The OCC’s initial response to this widely expected pushback was to claim that “the effect of stablecoin adoption on community bank deposits remains uncertain, and estimates vary widely.” The OCC pledged to “closely” monitor the situation to determine whether the banks’ expected tsunami of customer withdrawals comes to pass.
The OCC went further this week, suggesting in a Monday tweet that community banks ditch the Debbie Downer attitude and join the party. The OCC claimed that it “wants community banks to help shape the future of payments and is encouraging the development of payment stablecoin capabilities within the community banking sector.”
The tweet went on to encourage interested banks “to consider applying to become, or for a subsidiary to become, a permitted payment stablecoin issuer, as applicable. These opportunities complement the OCC’s Community Bank Comeback initiatives to right-size regulation and tailor supervision so community banks can grow, compete, and continue serving their communities.”
However, any banks wishing to accept this challenge will have to wait a while longer, as the OCC’s GENIUS page indicates that it is “not yet accepting waivers or applications from payment stablecoin issuers.” The OCC promises to announce when its issuer application derby commences.As an aside, the DeFi Education Foundation issued a survey this month called The State and Future of Finance: American Perspective. While the Foundation was keen to stress that no financial institution scored a majority of ‘yes’ votes on the question of whether consumers had ‘complete or a lot of trust’ in them, credit unions (48%), large national banks (42%) and regional or community banks (41%) all scored exponentially higher than decentralized platforms (5%) and crypto exchanges (4%). So this isn’t quite the flex the Foundation thinks it is.
Blumenthal targets Tether payments to GENIUS influencer
Meanwhile, a U.S. Senator is demanding answers following reports exposing the role that Tether, issuer of the world’s largest stablecoin by market cap (USDT), played in ensuring crucial changes were made to GENIUS pre-passage.
Earlier this month, the Wall Street Journal reported that a consulting firm co-owned by Bo Hines, former director of the White House’s ‘Crypto Council’ who was appointed CEO of Tether’s new U.S. operations mere weeks after GENIUS was signed into law, received payments from Tether while pushing for GENIUS revisions that favored Tether’s operations.
Hines, his father, and a third party co-owned the Nxum Group, which received $6.3 million from Tether via a deal that was negotiated while Hines was still at the White House. These payments commenced as Hines was convincing legislators to double the 18-month window in which stablecoins were required to come into compliance with GENIUS rules.
Tether has acknowledged that its mainstay USDT stablecoin has no plans to become compliant, hence this year’s launch of Tether’s new USAT stablecoin. But Hines’ efforts gave USDT a three-year reprieve from GENIUS rules, which makes Tether’s timely payments to Nxum look all the more questionable.
Enter Sen. Richard Blumenthal (D-CT), who on October 22 sent letters to both Hines and Tether CEO Paolo Ardoino seeking additional records on their financial arrangements. Blumenthal set a November 3 deadline for the pair to respond, although it should be noted that, as a member of the Senate minority party, Blumenthal’s letters don’t carry the same weight as a subpoena.
Regardless, Blumenthal cast a wide net, seeking communications between the parties, the contracts specifying terms, and the payment dates and methods (including any digital wallet addresses). Blumenthal also asked why the parties utilized an intermediary (‘marketing entrepreneur’ Peter Vincer) while Hines was still at the White House but opted to deal directly once Hines had left public service.
Blumenthal also wants to know why none of the parties filed any lobbying data, given the relationship appeared focused on amending a specific piece of legislation. Blumenthal notes the Journal’s reporting that Nxum and Hines coordinated via Signal group chats that featured “Ardoino demanding that Nxum ‘obliterate’ the legislation’s opponents.”
Blumenthal didn’t mince words, saying the “highly unusual terms and nature of Tether’s business relationship with both Nxum and Bo Hines raise alarming ethical and legal concerns, indicating that Tether was likely well aware of the illegality and impropriety of issuing payments to a current White House official with such a direct role in shaping cryptocurrency legislation that was instrumental to its business.” Blumenthal added that the report fit within the Trump administration’s overall “self-enrichment and self-dealings with cryptocurrency firms.”
Bizarrely, the day before Blumenthal issued his letters, Sam Kessler, the Journal reporter who broke the Hines-Tether story, tweeted that “someone impersonated a WSJ lawyer and had X take down [his initial thread on the story] for violating copyright.” Kessler included a screenshot of the DMCA takedown notice but added that the thread was “now back online.”
A few days before Blumenthal’s letters were sent, Ardoino tweeted his dismissal of a different Blumenthal probe into Tether’s connection to sanctions evasion efforts by Iran. Earlier this month, Blumenthal sent letters to Tether’s Wall Street partner Cantor Fitzgerald (NASDAQ: ZCFITX) seeking “information about your business partnership with Tether and to learn about your practices for detecting violations of American banking and sanctions laws.”
Cantor was given until October 23 to answer, but it’s unclear what response it gave, if any. Ardoino, on the other hand, was quick to rubbish Blumenthal’s efforts, saying Tether’s cooperation with U.S. authorities “led to Iran-linked stablecoin volumes declining by 94%.”
FAQs:
What do Canada’s proposed stablecoin rules cover, and when would they take effect?
The Department of Finance released the proposed regulations on October 24, opening a 60-day comment period. The rules are slated to take effect in “fall 2027” and implement the Stablecoin Act passed this spring. They aim to address the lack of regulatory requirements and supervisory oversight for stablecoin issuers with interprovincial and international reach.
Would Canadian stablecoin holders be able to earn interest or yield?
No. The rules would prohibit paying interest or yield tied to holding a stablecoin, whether it comes from the issuer or a third-party platform. Issuers could not enter arrangements that encourage holders to hold more of a stablecoin or hold it longer. Rewards or payments tied only to use of a stablecoin, including through income-sharing arrangements, would still be permitted.
What are the redemption and reserve requirements for issuers?
Issuers must process redemption requests within three business days, with no minimum redemption amount, and may charge fees capped at 1%. Reserves must be held in high-quality liquid assets such as cash and demand deposits, debt securities maturing in three months or less, one-day reverse repurchase agreements, and money market funds composed entirely of those assets. Reserves cannot be pledged or otherwise encumbered, and must be held at a Canadian-incorporated qualified custodian such as a bank, credit union, trust company, or insurance company.
How would compliance be monitored?
Issuers must submit monthly reports to the Bank of Canada, including a certified accountant’s opinion on the value of issued tokens, the reserves backing them, and whether those reserves meet the criteria. The Bank of Canada can also require a lawyer to attest to the accuracy of an issuer’s claims.
What is the controversy involving Tether and the U.S. GENIUS Act?
The Wall Street Journal reported that Nxum Group, a consulting firm co-owned by Bo Hines, received $6.3 million from Tether while pushing for revisions to the GENIUS Act that favored Tether. Hines, a former White House crypto official, was later named CEO of Tether’s U.S. operations. The payments reportedly began as Hines was convincing legislators to double the 18-month compliance window, which gave Tether’s USDT a three-year reprieve.
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