Six Canadian banks explore tokenized deposit system

According to a report by The Block, six major Canadian banks are jointly exploring a tokenized deposit system denominated in the Canadian dollar. The goal is to maintain the competitiveness and security of the nation’s payments infrastructure.

The participating institutions are 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. The group noted that other deposit-taking institutions may be included at an appropriate time.

The initiative aims to provide Canadian customers with faster, efficient, and programmable payments while maintaining safety, stability, and regulatory oversight, according to the statement.

This effort follows guidance from Canada's Office of the Superintendent of Financial Institutions. The regulator clarified earlier this month that tokenized deposits do not have a different legal status than traditional deposits.

" The underlying technology of a financial product or service does not determine its legal nature," OSFI said.

The current project expands on previous tokenization work in Canada. In March, the Bank of Canada, Export Development Canada, RBC, and TD Bank reported completing a pilot known as Project Samara. That initiative tested how blockchain technology could enhance the issuance and settlement of government bonds. For the new project, the banks stated that the first phase focuses on the efficient transfer of tokenized deposits among financial institutions.