Canadian Banks Explore Tokenized Dollar Deposits

Canada's six largest banks are teaming up to develop a system for tokenized Canadian dollar deposits. The initiative, which includes Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank Group, aims to create digital representations of bank deposits that can be easily transferred between financial institutions.

The first phase will focus on moving tokenized deposits within the Canadian financial system before potentially connecting with other digital asset systems. This project comes after Canada's banking regulator provided clarity on the legal permissibility of tokenized deposits for financial institutions, stating that they are 'not legally distinct from traditional deposits.'

Tokenized deposits represent money held at a regulated bank and remain a liability of that bank, unlike fiat-backed stablecoins which are separate digital assets backed by reserves held by their issuer. The banks said the system is intended to support faster and programmable payments.