Canada’s proposed rules and the US GENIUS Act both resist turning payment stablecoins into interest-bearing products. The difference is who faces the restriction—and what that could mean for DeFi and tokenized assets.
A stablecoin issuer can hold reserve assets that earn income. Does any of that income belong to people holding its tokens? Canada and the United States are drawing the line in different places.
Canada’s proposed Stablecoin Act says a non-bank issuer must not pay interest, yield or other income to a holder in connection with holding its stablecoin. Draft regulations published on October 24, 2026, would also restrict income-sharing arrangements involving other people. In the United States, the GENIUS Act prohibits a payment-stablecoin issuer from paying interest or yield solely in connection with holding, using or retaining the token. US treatment of some third-party rewards remains more dependent on the arrangement’s substance.
Timing matters: Canada’s restriction is a proposal, not an operative ban under a completed stablecoin regime. The US law has been enacted, while the OCC’s final implementing rule is scheduled to take effect on January 18, 2027. Neither development means that every existing stablecoin reward program became unlawful on October 24, 2026.
The point is not whether yield can exist anywhere near a stablecoin. It is who creates it, who funds it, and whether the holder receives it because they hold the payment token.
Where do Canada and the US draw the line?
| Question | Canada’s proposed framework | US GENIUS Act framework |
|---|---|---|
| Can the issuer pay a holder for holding the stablecoin? | No, under the proposed non-bank issuer rule. | No, under the issuer prohibition. |
| Can another firm offer a reward? | The draft also targets specified third-party income-sharing arrangements; the terms matter. | Not automatically prohibited or permitted; the relationship with the issuer matters. |
| Can a holder earn income by using the token in a separate activity? | The proposal should not be read as a blanket ban on all activities involving stablecoins. The activity and parties require separate analysis. | The issuer ban does not, on its face, ban all independent lending, trading or investment activity. |
| Is the rule fully in force? | No. The Canadian measures remain proposed. | The Act is law; the OCC’s final rule takes effect January 18, 2027. |
These are policy distinctions, not a list of approved products. A reward described as a “loyalty payment” may still raise the same issue as interest if it is funded or arranged to compensate a person for holding a token. Conversely, income generated when someone takes on lending or investment risk is not necessarily interest paid by the stablecoin issuer.
Why does Canada’s proposal reach beyond the issuer?
A rule aimed only at direct issuer payments leaves a possible route around it: the issuer retains reserve income, pays a distributor, and the distributor advertises a reward for holding the token. The holder sees yield even if the issuer never sends them an interest payment.
Canada’s October 2026 draft addresses that concern by looking at arrangements that share income connected to stablecoin issuance or reserves. Its approach makes the relationship between issuer and partner central to compliance. If enacted as proposed, firms could not assume that routing an issuer-funded holder reward through another company solves the problem.
That does not mean Canada has proposed banning every return earned with a stablecoin. A holder might transfer tokens into an activity that has its own source of income and its own risks. The question would be whether that activity is separate from the issuer’s promise, or instead repackages a payment for holding the stablecoin. The final wording and its application will matter for firms designing Canadian products.
The proposal changes the business calculation for issuers. Rather than using reserve income to promise holders a return, an issuer would need to compete through distribution, redemption, access and utility. A partner building on the token would need to document where any reward comes from. Calling a payment “third-party yield” would not answer that question.
What does the US GENIUS Act leave open?
The GENIUS Act sets a clear baseline for permitted payment-stablecoin issuers: they cannot pay interest or yield to holders solely because those holders hold, use or retain the stablecoin. This separates a payment token from a product marketed as an interest-bearing claim on the issuer.
The harder question concerns a reward paid by someone else. The OCC’s October 2026 final rule removed a proposed presumption that would have treated certain affiliate and third-party arrangements as violating the yield restriction. Instead, the OCC said it would assess arrangements through applications and supervision. Removing a presumption is not blanket permission. An agent paying on an issuer’s behalf, or a structure designed to evade the issuer ban, could still breach the rule.
For a US rewards program, labels are less useful than a funding map. Does the partner pay from its own business revenue? Is the reward contingent on the user merely maintaining a token balance? Does the issuer reimburse the partner or control the offer? A program can look independent to a customer while depending on an agreement with the issuer. Those facts may determine whether it falls outside the issuer prohibition or functions as issuer-paid yield.
This article does not need to repeat the broader US reserve and redemption rules to make that distinction. For the yield question, the relevant contrast is Canada’s proposed reach into specified income-sharing arrangements versus the US focus on issuer payments, with third-party structures reviewed on their facts.
What changes for a stablecoin holder?
A holder should separate four things that can all be advertised as “earning on stablecoins”:
- Issuer yield: Payment received because the person holds or uses the issuer’s payment token. This is the core target of both approaches.
- Platform rewards: Payment from a distributor or service provider. Its treatment depends in part on who funds and controls it.
- DeFi lending income: A return that may come from borrowers or protocol activity after the holder commits assets to a separate transaction.
- RWA income: Payments from a tokenized claim on an asset, such as a fund holding short-term government debt, rather than from ownership of the payment stablecoin itself.
These are not interchangeable risk exposures. A stablecoin can be used to make a payment without the holder deploying it elsewhere. Lending may involve smart-contract, borrower and liquidity risk. A tokenized fund may involve eligibility, custody and redemption terms tied to a separate financial product. A quoted percentage return does not explain which of those risks produced it.
The policy consequence is a clearer boundary between a payment instrument and an investment product. For a holder, that boundary may make product choices easier to understand—but only if providers state where returns originate and what happens to the underlying claim.
How could the rules affect DeFi?
DeFi protocols often use stablecoins as the asset deposited into a lending market or liquidity pool. A restriction on issuer-paid yield does not necessarily prohibit that use: a lending return can arise from borrowers paying for capital, rather than from an issuer paying people to hold its token.
But the boundary may change distribution. An issuer could face constraints on promoting a partner arrangement that delivers a holding reward under another name. A protocol that operates independently of an issuer may present a different case from one whose rewards are funded through an issuer agreement. In Canada, the proposed income-sharing restrictions make that relationship worth examining from the start. In the US, the OCC’s case-by-case approach leaves firms with a similar need to document the relationship, even though the legal route differs.
One possible result is more visible separation between the stablecoin and the activity that produces income: users acquire a payment token, then choose whether to enter a lending or liquidity position. That separation would not make DeFi returns safe. It would make the source of the return—and the point at which a user takes on additional risk—more explicit. This is a potential market response, not a requirement that every protocol adopt the same design.
What is the potential effect on tokenized real-world assets?
Tokenized real-world assets, or RWAs, offer another route to income. A token representing an interest in a money-market fund or other asset is not the same claim as a payment stablecoin backed by reserves. The fund token may distribute income generated by assets it owns; the stablecoin serves as a means of payment or settlement.
If issuers cannot turn reserve income into a holder benefit, firms seeking to offer yield may keep the products separate: a payment stablecoin for transfer and a regulated investment claim for income. That could encourage payment tokens to function as settlement assets for RWA transactions. It could also increase scrutiny of products that describe themselves as payment stablecoins while promising returns that resemble those of an investment.
The distinction carries operational costs. Moving from a stablecoin into an RWA product may require eligibility checks, subscriptions, custody arrangements and separate redemption processes. It also gives holders a more precise question to ask: Am I owed redemption of a payment token, or do I own an interest in an asset that may rise or fall in value?
The policy split to watch
Canada’s proposal and the US GENIUS Act share a starting point: a payment stablecoin should not become an interest-bearing product simply because its reserves may earn income. They differ in how directly they address payments routed through other firms. Canada’s draft seeks to close specified income-sharing paths; the US has prohibited issuer yield while leaving the treatment of third-party programs to the facts and supervision. For DeFi and RWAs, the issue is not whether income disappears. It is whether firms can show that income comes from a separate activity or asset, rather than from an issuer-funded reward for holding a payment token. The next changes to watch are the final Canadian text, how US supervisors treat specific partner programs, and how providers explain that distinction to holders.
