Canada’s Top Six Banks Investigate Tokenized CAD Deposits

Six of Canada’s largest banks are developing a shared approach to move tokenized Canadian dollar (CAD) deposits between institutions, a project aimed at making payments faster and more programmable while remaining rooted in traditional banking liabilities.

According to a joint announcement released Tuesday, Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group said the work will begin with transferring tokenized deposits across Canadian financial institutions. The banks noted that future stages could expand connectivity to other digital asset systems.

Key takeaways

• The initiative covers tokenized bank deposits, which the banks characterize as still remaining liabilities of the issuing bank.
• Initial scope is intra-Canada deposit movement between regulated financial institutions, with potential expansion later to other digital money systems.
• The banks’ move follows OSFI guidance stating tokenized deposits are not legally separate from traditional deposits.
• Canada is also rolling out a separate regulatory framework for fiat-backed stablecoins, though that ruleset does not directly cover banks and credit unions.

Why tokenized deposits are drawing bank attention

Tokenized deposits are designed to represent claims on money held at a regulated bank, typically using distributed ledger or similar technologies to create a digital representation of the deposit. In the banks’ framing, that distinction matters: the deposit remains a bank liability rather than an independent digital asset.

The project’s stated goal is to support faster payments and enable greater programmability compared with conventional settlement paths. For investors and market participants, the appeal is straightforward—systems that can reduce reconciliation friction and shorten settlement cycles without requiring banks to treat deposits as “new” financial instruments.

OSFI clarity helps remove legal ambiguity

The timing is notable. The bank initiative arrives less than two weeks after Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), provided additional clarification on how tokenized deposits should be treated under Canadian law.

In a Sept. 10 statement, OSFI said tokenized deposits are “not legally distinct from traditional deposits,” emphasizing that the underlying technology used to deliver a financial product does not change its legal character.

This regulatory posture is important because it directly addresses one of the core hurdles for tokenized settlement models: whether “digital representation” changes the legal nature of deposits. By stating that it does not, OSFI effectively lowers compliance uncertainty for institutions that want to experiment with new rails for moving value.

How the banks’ plan fits with Canada’s stablecoin rules

Canada’s tokenized deposit work is unfolding alongside a broader national push to regulate digital money—particularly fiat-backed stablecoins.

In March, Canada enacted its Stablecoin Act as part of Bill C-15, setting out a federal framework for fiat-backed stablecoins issued by non-financial institutions. The regime requires issuers to register with the Bank of Canada, maintain reserves at least at a 1:1 level in high-quality liquid assets, and provide redemption at par. The framework is expected to take effect in 2027.

However, the scope of the stablecoin framework is limited. The law covers fiat-backed stablecoins issued by non-financial entities, while banks and credit unions already governed by prudential regulation fall outside its coverage. OSFI and market observers have also highlighted that issuers under the stablecoin regime will be prohibited from representing their stablecoins as deposits or as insured under a public deposit insurance system.

That difference creates a structural contrast between the banks’ deposit-tokenization effort and the stablecoin market: tokenized deposits remain within the banking perimeter, whereas fiat-backed stablecoins face a separate set of reserve, redemption, and marketing restrictions. Together, the two tracks suggest Canada is attempting to build a coherent regulatory architecture where “what you are” legally matters more than “what it looks like technically.”

What to watch as Phase 1 begins

The banks say the first phase will focus on moving tokenized deposits between Canadian financial institutions before potentially connecting with other digital asset systems. While the announcement did not provide granular technical details in the excerpt available, the phased approach indicates a practical priority: proving operational and settlement reliability within a tightly bounded network.

For users and counterparties, the key question will be how the system handles typical deposit lifecycle needs—such as custody, redemption mechanics, reconciliation, and settlement finality—without changing the underlying liability structure that OSFI says remains legally tied to traditional deposits.

For the broader industry, the next milestone to track is whether the project evolves beyond domestic interbank transfers into a model that meaningfully interoperates with other digital settlement networks. That will test not only technology but also regulatory boundaries—particularly around where “deposit tokenization” ends and where other forms of digital assets begin.

As Phase 1 progresses, the most important signals will likely be whether the banks can demonstrate faster, more programmable payments while staying aligned with OSFI’s legal interpretation—and whether Canada’s separate stablecoin framework influences how these tokenized deposit rails might connect to the wider ecosystem over time.