Canada’s Six Largest Banks Explore Tokenized Canadian Dollar Deposit System
Canada’s six largest banks — Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group — have joined efforts to develop a system for tokenized Canadian dollar deposits. This initiative aims to create digital representations of bank deposits that can move seamlessly between Canadian financial institutions. The project follows recent regulatory clarifications concerning the legal status of tokenized deposits and is designed to facilitate faster, programmable payments within the country’s banking sector.
Project Participants and Objectives
The project involves Canada’s six largest banks: Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group. According to their joint announcement on Tuesday, the initial phase focuses on facilitating the movement of tokenized deposits between Canadian financial institutions, with potential plans to connect with broader digital asset ecosystems in the future.
Regulatory Clarifications and Legal Status
Less than two weeks prior, Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), clarified that tokenized deposits are legally indistinguishable from traditional deposits. OSFI emphasized that the underlying technology does not determine the legal nature of financial products.
Unlike fiat-backed stablecoins—which are separate digital assets backed by reserves—tokenized deposits represent liabilities of regulated banks, backed by actual funds held within these institutions.
Technical Features and Future Plans
The system is intended to enable faster and programmable payments within Canada’s financial sector. Longer-term ambitions include expanding access to other deposit-taking institutions beyond the six founding banks.
Requests for further comment from CIBC regarding the initiative have not yet been answered.
Canada’s Broader Digital Money Regulation
In March 2024, Canada passed the Stablecoin Act as part of Bill C-15, establishing federal regulations for fiat-backed stablecoins issued by non-financial institutions. These regulations require issuers to register with the Bank of Canada, maintain full reserves in high-quality liquid assets, and provide redemption at par value.
Banks and credit unions, which are already subject to prudential regulation, are excluded from this framework. Furthermore, issuers covered by the stablecoin act are prohibited from representing their stablecoins as bank deposits or as insured by public deposit insurance schemes.
Why it matters
The announcement that Canada’s six largest banks are collaborating on tokenized Canadian dollar deposits highlights growing institutional interest in digital financial technologies that maintain traditional regulatory assurances. Supported by recent regulatory clarifications, this initiative could accelerate the adoption of faster and programmable payments while preserving legal certainty and financial safety for clients. Moreover, the project fits into Canada’s broader efforts to develop a comprehensive regulatory framework for digital currencies, a key factor for the resilience and innovation of the country’s financial system.
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