Canada’s Six Largest Banks Explore Tokenized Deposit System
Canada’s six largest banks are joining forces to explore a Canadian-dollar tokenized deposit system designed to improve the country’s payments infrastructure while maintaining existing financial safeguards.
Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and TD Bank Group announced the initiative in a joint statement Tuesday.
The first phase will focus on enabling tokenized deposits to move more efficiently between financial institutions. The banks said the project is intended to support faster and more efficient payments, while also allowing for programmable transactions.
The initiative is expected to keep regulatory oversight and financial stability at the center of the project. The participating banks also said other deposit-taking institutions could join at a later stage.
The project comes after Canada’s Office of the Superintendent of Financial Institutions clarified the regulatory treatment of tokenized deposits earlier this month. OSFI said tokenized deposits are not legally separate from traditional bank deposits, noting that the technology used to deliver a financial product does not determine its legal status.
The regulatory clarification provides a framework for banks to explore blockchain-based deposit infrastructure while maintaining the existing legal treatment of deposits.
Canada’s latest banking initiative also follows previous efforts to test tokenization technology. In March, the Bank of Canada, Export Development Canada, RBC and TD completed Project Samara, a tokenization pilot focused on examining how blockchain could improve the issuance and settlement of government bonds.
The new project expands that exploration into bank deposits and payments. If successful, the system could provide Canadian financial institutions with a shared infrastructure for transferring digital representations of deposits while retaining the safeguards associated with traditional banking.
The banks have not provided a specific timeline for the rollout or detailed how the tokenized deposit system will operate beyond its initial development phase. Further participation from other financial institutions could also expand the project's reach as the initiative progresses.