Canada's Big Six Banks Collaborate on Tokenized Deposits

The six largest banks in Canada are collaborating on a project to create tokenized Canadian dollar deposits. This initiative is part of a broader global effort to explore the use of regulated commercial bank deposits as an alternative to cryptocurrencies for blockchain settlement.

The participating banks, including Bank of Montreal, National Bank of Canada, Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Toronto-Dominion Bank, will represent their deposits on a blockchain. This approach, known as tokenized deposits, is considered a bank liability held and recorded on a distributed ledger.

The value of tokenized deposits lies in their programmability without leaving the regulated banking space, allowing banks to boost efficiency and speed in making payments while operating around the clock.

Canada's Office of the Superintendent of Financial Institutions (OSFI) has provided regulatory clarity for the project. OSFI stated that tokenized deposits are not different from conventional deposits legally speaking, allowing banks to continue operating under existing regulations.