Canada’s six largest banks have joined forces to develop and pilot a shared system for tokenized Canadian-dollar deposits. The initiative, announced on Tuesday, aims to allow digital representations of existing bank deposits to move efficiently between participating institutions while remaining under traditional banking oversight.

The participating lenders are Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Scotiabank and Toronto-Dominion Bank Group. Other deposit-taking institutions may join later as the project advances, subject to regulatory, technical and operational requirements.

First Phase Focuses on Domestic Interbank Transfers

In the initial stage, the banks will test transfers of tokenized deposits among themselves. These tokens represent money already held at the issuing banks and continue to be recorded as liabilities on those banks’ balance sheets. The approach uses digital ledger technology solely as the transfer and programming infrastructure rather than creating a new form of asset.

The banks stated that the system is intended to support more efficient circulation of funds between Canadian financial institutions. Potential benefits include processing certain transfers outside the limited operating windows of traditional payment systems and enabling programmable instructions that release funds only when predetermined conditions are met, subject to each bank’s compliance and risk controls.

No timetable has been set for commercial deployment or for expanding access beyond the current participants. Longer-term plans include the possibility of connecting the Canadian network with other digital asset programs, though no specific external partners or timelines have been identified.

Regulatory Clarity from OSFI

The announcement follows a statement issued on September 10 by the Office of the Superintendent of Financial Institutions. The regulator confirmed that tokenized deposits are not legally distinct from conventional deposits simply because they are represented using blockchain or another digital system.

OSFI applies a technology-neutral approach, assessing the financial product itself rather than the underlying technology. Banks remain subject to the same legal, operational, cybersecurity and third-party risk requirements that govern their existing deposit businesses. Institutions must also consult their lead supervisors before introducing novel products or services.

Distinction from Stablecoins

Tokenized deposits differ fundamentally from fiat-backed stablecoins. A tokenized deposit remains a direct claim on the issuing bank, carrying the same legal status and protections as a conventional deposit. Stablecoins, by contrast, are typically issued as separate digital assets backed by cash, government securities or other reserves held by the issuer.

Canada has established a separate regulatory framework for fiat-backed stablecoins through the Stablecoin Act, enacted in March as part of Bill C-15. The rules, expected to take effect in 2027, require non-financial institution issuers to register with the Bank of Canada, maintain reserves of at least one-to-one in high-quality liquid assets and offer redemption at par. Banks and credit unions already under prudential regulation fall outside the scope of this framework. Issuers covered by the Act are also prohibited from presenting their tokens as deposits or as insured under public deposit insurance.

Building on Earlier Experiments

The new interbank project follows the completion of Project Samara in March. In that experiment, the Bank of Canada, Export Development Canada, RBC Capital Markets, RBC Investor Services and TD Bank successfully issued, traded and settled a 100 million Canadian dollar tokenized bond using distributed ledger technology. The trial demonstrated operational efficiencies and direct settlement on the platform while also identifying challenges related to liquidity, governance and integration.

Similar efforts are under way in other jurisdictions. In the United States, major banks including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are developing a shared deposit network through The Clearing House, with a target of the first half of 2027. Individual institutions such as Wells Fargo are also preparing their own tokenized deposit services for corporate clients.

The Canadian banks have not announced any direct connection to these foreign initiatives. For companies operating across the Canada-U.S. border, compatible systems could eventually offer additional routes for moving funds, though no such links have been confirmed.

The pilot remains exploratory. Key details regarding technical architecture, settlement finality, custody arrangements and precise operational controls have not yet been disclosed. Market participants will monitor how the banks define and implement the first phase in the coming months.