Canada’s Six Largest Banks Explore Shared Tokenized Deposit System

In Brief:

• Canada’s six largest banks are testing how tokenized Canadian-dollar deposits could move between institutions to support faster, more efficient payments.
• OSFI clarified that tokenized deposits remain legally equivalent to traditional deposits, while banks retain responsibility for regulatory and technology risks.
• The initiative builds on Canada’s earlier tokenized bond experiment, but the banks have announced no platform, launch date, or customer service.

Canada’s six largest banks are examining how tokenized Canadian-dollar deposits could move between their institutions to support faster payments. Their first phase will test transfers across banks, placing the practical challenge of moving deposits at the centre of the project.

Bank of Montreal, CIBC, National Bank of Canada, RBC, Scotiabank and TD Bank Group are taking part in the initiative. According to their joint announcement, the banks want Canada’s payment infrastructure to remain competitive and secure as digital transactions develop.

A tokenized deposit represents money held at a bank in digital form, allowing institutions to examine different ways of transferring it. For the participating banks, the central question is whether those representations can move efficiently across separate financial systems.

That question matters because many payments involve a sender and recipient who use different banks. Consequently, the project begins with transfers between institutions before considering how customers might benefit from the system.

The banks expect tokenized deposits to support faster, more efficient, and programmable payments while preserving stability and regulatory oversight. However, they have not announced a customer product, identified specific payment types or provided a timetable for a launch.

Other deposit-taking institutions could join the initiative at an appropriate stage, according to the banks’ statement. Their possible participation would expand the group, although the six banks must first examine how transfers work among themselves.

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Regulatory Guidance Gives Banks a Basis for the Project

The project follows guidance from Canada’s Office of the Superintendent of Financial Institutions, which addressed the legal treatment of tokenized deposits. In its September statement, OSFI clarified that tokenized deposits are not legally distinct from traditional bank deposits.

That clarification means the technology used to represent a deposit does not determine the product’s legal nature. Banks must still follow applicable rules when they develop services, including requirements covering technology, cyber and third-party risks.

OSFI also expects institutions to speak with their supervisors before launching novel products or services. Therefore, the banks’ exploration will need to account for existing oversight as they assess how cross-bank transfers could operate.

Canada’s financial sector has already tested tokenization, although an earlier project examined bonds rather than transfers between banks. In March, the Bank of Canada, Export Development Canada, RBC and TD completed an experiment called Project Samara.

That project tested a tokenized bond and examined how distributed ledger technology could support its issuance and settlement. The bond went to a closed investor group, giving Project Samara a different purpose from the deposit initiative.

RBC and TD’s involvement in both efforts shows how the banks have applied tokenization to separate financial activities. With all six major banks participating, the new project concentrates on moving Canadian-dollar deposits between institutions.

The banks have not disclosed which technology the deposit system would use or when they expect the first phase to end. For now, their stated goal is to determine whether tokenized deposits can move efficiently across participating banks.

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