Canadian Banks Pioneer Tokenized CAD Deposits for Interbank Settlement

Six major Canadian banks have launched a joint initiative to explore tokenized CAD deposits for settlement. The project, which includes Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group, aims to modernize payments by using digital tokens to represent deposits.

The banks' approach is grounded in existing deposit structures, with tokenized products still corresponding to money held at a regulated bank and remaining that bank's liability. This distinction matters because it shapes how risk and oversight are applied, according to OSFI's earlier guidance.

OSFI recently clarified that tokenized deposits are 'not legally distinct from traditional deposits,' aligning the banks' work with regulatory clarity. The banks' first phase will focus on transferring tokenized deposits between Canadian financial institutions, reducing friction points in cross-institution payment flows.

The project's longer-term plans could involve opening the system to other deposit-taking institutions and possibly connecting with other digital asset systems. Market participants are watching how participating banks define the project's scope in practice, particularly around settlement finality and compliance controls.