Canada's six largest banks are jointly exploring a system for tokenized Canadian dollar deposits that would allow digital representations of bank deposits to move between financial institutions.
The initiative involves Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank Group. The first phase will focus on moving tokenized deposits between Canadian financial institutions before potentially connecting with other digital asset systems.
The banks said the system is intended to support faster and programmable payments, with longer-term plans including opening the initiative to other deposit-taking institutions.
Regulatory Clarity
The project comes less than two weeks after Canada's banking regulator provided additional clarity on tokenized deposits. On September 10, the Office of the Superintendent of Financial Institutions (OSFI) stated that tokenized deposits are "not legally distinct from traditional deposits," adding that the underlying technology of a financial product does not determine its legal nature.
Tokenized deposits represent money held at a regulated bank and remain a liability of that bank, unlike fiat-backed stablecoins, which are separate digital assets backed by reserves held by their issuer.
Canada's Broader Digital Money Framework
The tokenized deposit initiative comes as Canada builds out a broader regulatory framework for digital money. In March, Canada enacted its Stablecoin Act as part of Bill C-15, establishing a federal framework for fiat-backed stablecoins.
Under the regime, non-financial institution issuers will be required to register with the Bank of Canada, maintain reserves of at least 1:1 in high-quality liquid assets and offer holders redemption at par. The framework is expected to take effect in 2027.
The framework covers only fiat-backed stablecoins issued by non-financial institutions. Banks and credit unions already subject to prudential regulation fall outside its scope. Issuers covered by the framework will also be prohibited from representing their stablecoins as deposits or as insured under a public deposit insurance system.
