Canada Clarifies Tokenized Deposits as Legally Equivalent to Traditional Bank Deposits

Canada's banking regulator OSFI has clarified its stance on tokenized deposits, stating that they are not legally distinct from traditional bank deposits. This clarification reinforces a technology-neutral regulatory approach and creates a path for banks to modernize settlement infrastructure without changing the deposit's regulatory identity.

Under the framework, a tokenized traditional asset must provide the same legal rights as its conventional equivalent. For bank deposits, those rights include access to cash flows and claims during insolvency. The token also cannot introduce features that materially weaken the bank's ability to meet its obligations.

Qualifying tokenized deposits fall into Group 1a and generally receive the same credit-risk treatment as traditional assets. However, OSFI makes this treatment conditional on the token's legal structure, redemption terms, and holder protections. Banks must keep tokenized deposits redeemable at par, legally binding, and tied to issuer creditworthiness.

Regulators can apply stricter treatment when wallet providers, blockchain operators, or redemption structures introduce added operational or liquidity risks. This keeps technology-related risks inside the prudential framework instead of ignoring them.