Canada’s six largest banks are jointly exploring a Canadian-dollar tokenized deposit system that could reshape how regulated financial institutions transfer money between one another. The initial phase will examine ways to move tokenized deposits efficiently across participating firms, bringing 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 into a shared effort.
The project would apply distributed-ledger technology to commercial-bank deposits rather than create a new cryptocurrency or a retail stablecoin. Each token would represent a deposit claim on a participating bank, potentially allowing institutions to exchange eligible funds through a common digital record while retaining the existing banking framework behind those deposits.
The group said additional deposit-taking institutions could join at an “appropriate time.” That wording leaves the early work concentrated among Canada’s biggest lenders, whose combined reach across consumer banking, corporate payments and capital markets gives the experiment practical weight even before a product is introduced.
Osfi places tokenized deposits within existing deposit rules
The banks’ initiative follows guidance from the Office of the Superintendent of Financial Institutions earlier this month stating that tokenized deposits are “not legally distinct from traditional deposits.” OSFI also said a technology used to deliver a financial product or service does not itself determine that product’s legal nature.
That position provides an important operating premise for banks testing deposit tokens. A bank deposit recorded through blockchain-based infrastructure would remain a bank deposit, subject to the legal and prudential framework governing the institution that issued it. The token changes the method of recording or transferring the claim; it does not automatically turn the claim into a separate digital asset category.
The distinction separates the proposal from privately issued stablecoins, which generally rely on reserves held by their issuers and can operate outside the direct balance sheets of deposit-taking banks. A tokenized deposit would instead be a liability of the issuing bank, similar in principle to money held in a conventional account.
OSFI’s statement does not amount to a blanket approval of every possible tokenized-deposit design. Banks would still need to address operational resilience, technology risk, governance, anti-money-laundering obligations and the rules governing payments and settlement. Yet the regulator’s view reduces uncertainty around the basic legal classification of the product the lenders are studying.
The model targets interbank transfers first
The proposed first phase is focused on transfers across financial firms rather than on a consumer-facing token for everyday spending. That choice places the project closer to payments infrastructure than to a public crypto launch.
Interbank transfers often involve multiple internal systems, settlement windows and reconciliation processes. A shared ledger could give participating institutions a synchronized record of ownership and movement, potentially reducing the need to reconcile separate databases after transactions occur. Whether it can produce faster settlement in practice will depend on the final technical structure, operating hours, participant rules and regulatory approvals.
The banks have not set out a public timeline for a commercial rollout or disclosed the network’s underlying technology. They also have not specified whether the arrangement would support only transfers among the founding lenders or eventually connect to other Canadian financial institutions.
Those unanswered design questions are substantial. A closed network operated by a handful of banks could improve processes within that group but would have limited reach across the wider Canadian payments market. Adding more deposit-taking institutions could make the system more useful, while also increasing the governance and interoperability issues the banks would need to resolve.
Project samara tested tokenized bond settlement
The bank-led work builds on recent Canadian experiments involving tokenized government-debt markets. In March, the Bank of Canada, Export Development Canada and two of the participating lenders completed Project Samara, a pilot that included a CAD 100 million bond issuance.
Project Samara tested blockchain-based processes for issuing and settling the bond. The exercise placed tokenization in a controlled institutional setting, where the main objective was to examine whether digital ledgers could support established financial instruments and workflows rather than replace them.
The latest deposit-token exploration extends that approach from a single debt-market transaction toward the movement of bank money. Bond issuance and settlement occur in capital markets, often involving specialized institutions and defined transaction cycles. Deposits sit much closer to the daily flows that support corporate treasury operations, payments between financial firms and the settlement of other financial transactions.
That makes the project more operationally demanding than a one-off tokenized bond pilot. Deposit transfers must function reliably across a broad range of conditions, including fraud controls, account restrictions, outages, liquidity management and institutional compliance requirements.
Competition with stablecoins will depend on access
A Canadian-dollar tokenized deposit network could create a regulated alternative for institutions that want blockchain-based settlement using claims on major banks. It would not necessarily displace stablecoins, whose appeal can include access to public blockchain networks, 24-hour transferability and use across decentralized applications.
The banks’ model is likely to be more controlled. Participation would be tied to regulated financial institutions and the rules of the network, an approach that may suit corporate and institutional transfers but offers a different proposition from tokens designed for broad public circulation.
Canada’s six largest lenders are therefore testing whether blockchain technology can be incorporated into the core banking system without changing the legal character of money already held at banks. The answer will depend less on the existence of a token than on whether the network can connect enough institutions, settle transfers safely and offer a measurable improvement over the systems banks use today.
Curious how tokenized deposits compare to CBDCs and stablecoins? Explore our guide on central bank digital currencies next.
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