Canada's Six Largest Banks Pilot Tokenized CAD Deposits
Major Canadian banks will pilot tokenized deposits for interbank payments following new regulatory clarity from OSFI.
Key points
- Canada's six largest banks will pilot tokenized CAD deposits for interbank payments.
- OSFI clarified that tokenized deposits are legally identical to traditional bank liabilities.
- The pilot differs from stablecoins as it remains a direct bank liability rather than a separate asset.
Canada's six largest banks announced a joint initiative to pilot tokenized Canadian dollar deposits. The system aims to move digital representations of deposits between financial institutions. This marks the first phase of a broader interoperability project.
The announcement follows a regulatory clarification from the Office of the Superintendent of Financial Institutions. Regulators stated that tokenized deposits are not legally distinct from traditional bank liabilities. This removes a key legal barrier for the banks' planned implementation.
Regulatory Clarity Enables Pilot Launch
OSFI confirmed on September 10 that the underlying technology does not alter a product's legal nature. This guidance allows banks to treat tokenized assets as standard liabilities on their balance sheets. The regulatory stance provides the necessary legal foundation for the pilot program.
The six participating institutions include Bank of Montreal, CIBC, and National Bank of Canada. Royal Bank of Canada, Scotiababank, and TD Bank Group also join the effort. They will test the system before potentially linking it to external digital asset networks.
Distinction From Stablecoin Framework
Tokenized deposits differ fundamentally from fiat-backed stablecoins in their legal structure. Stablecoins are separate digital assets backed by reserves held by their specific issuer. Tokenized deposits remain direct liabilities of the regulated bank holding the customer funds.
Canada enacted its Stablecoin Act in March to regulate non-financial institution issuers. This law requires a 1:1 reserve backing in high-quality liquid assets for stablecoins. Banks and credit unions fall outside this specific regulatory scope due to their existing prudential oversight.
Strategic Goals For Faster Payments
The banks intend to use the system to support faster and programmable payment flows. Initial testing focuses exclusively on domestic interbank transactions within the Canadian financial system. Long-term plans include opening the infrastructure to other deposit-taking institutions.
Cointelegraph contacted CIBC for additional details on the technical specifications of the pilot. The bank did not provide an immediate response to the inquiry. The initiative represents a significant step in modernizing Canada's core payment infrastructure.
