Banks in Canada Launch Tokenized CAD Deposits Pilot for Interbank Settlement
Canada's six largest banks have launched a joint project to develop tokenized Canadian dollar (CAD) deposits for interbank settlement. The initiative involves Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group.
The first phase of the project will focus on transferring tokenized CAD deposits between Canadian financial institutions, with a potential later step connecting it to other digital asset ecosystems. This approach aims to modernize payments by using digital tokens to represent deposits, enabling faster transfers and programmable payment features.
Tokenized deposits differ from fiat-backed stablecoins as the deposits remain a liability of a regulated bank, not a separate digital asset issued by a third party. This distinction is crucial as it affects how risk and oversight are applied.
The Office of the Superintendent of Financial Institutions (OSFI) clarified earlier this month that tokenized deposits are 'not legally distinct from traditional deposits.' This regulatory clarity aligns with the banks' approach, which treats tokenized deposits as functionally equivalent to conventional deposits from a legal standpoint.