Big Six Banks Launch Joint Tokenized Deposit System

Canada's six largest banks have launched a joint initiative to develop a tokenized deposit system for faster and more programmable payments. The system, which will allow for near-instant settlement and conditional payments, is designed to make interbank transfers easier and more efficient.

The Big Six, Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group, announced the initiative on September 22. The project's first phase will focus on moving tokenized deposits between the six institutions, with the long-term goal of achieving interoperability with digital asset initiatives.

The banks' decision to launch the project together is notable, as most tokenized deposit pilots have started with one or two institutions testing the waters before others join. This approach avoids the 'chicken-and-egg problem' that has stalled similar projects elsewhere.

Canada's financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), clarified on September 10 that tokenized deposits would not be treated as a separate asset class simply because they sit on distributed ledger technology. This guidance effectively removed a major ambiguity that had been holding banks back from experimenting with the technology.