Canada Clears Tokenized Deposits: Banks Get Green Light on Blockchain-Backed Accounts

The Office of the Superintendent of Financial Institutions (OSFI) in Canada has clarified the legal status of tokenized deposits. According to OSFI, a tokenized deposit should be treated as any other deposit accepted by federally regulated financial institutions.

OSFI stated that its technology-neutral approach focuses on the nature of the product, not on the infrastructure used to create or deliver it. This means that tokenization of a deposit on a blockchain or other network does not create or modify a separate, distinct financial instrument.

Tokenized deposits are not legally distinct from underlying deposits and banks are subject to the existing federal regulatory framework for the underlying banking activity. Institutions are ultimately responsible for meeting any compliance and legal obligations even when using third-party technology service providers.

The regulator also encouraged institutions to refer to its B-13 guideline on technology and cyber risk management and B-10 guideline on third-party risk management. Banks considering a new product or service should contact their OSFI lead supervisors before launching them.