Canada's big six banks explore tokenized deposit system to modernize payments

Canada's six largest banks are jointly exploring a Canadian-dollar tokenized deposit system in an effort to keep the country's payments infrastructure "competitive and secure."

In a joint statement released Tuesday, the banks said the first phase of the project involves moving tokenized deposits efficiently across financial institutions.

"It seeks to deliver faster, more efficient and programmable payments to Canadian customers while preserving safety, stability, and effective regulatory oversight," the statement said.

The participating banks are Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada (RBC), The Bank of Nova Scotia, and TD Bank Group. The initiative may include other deposit-taking institutions at an "appropriate time," the statement added.

The project follows regulatory clarification from Canada's Office of the Superintendent of Financial Institutions (OSFI), which said earlier this month that tokenized deposits are "not legally distinct from traditional deposits."

"The underlying technology of a financial product or service does not determine its legal nature," the OSFI said.

The latest joint initiative also builds on earlier tokenization efforts in Canada. In March, the Bank of Canada, Export Development Canada, RBC and TD Bank said they completed a tokenization pilot called Project Samara, which aimed to evaluate the role of blockchain technology in improving government bond issuance and settlement.