Key facts
- Canada's six largest banks are exploring a shared digital-dollar network for tokenized Canadian dollar deposits.
- The initiative involves Royal Bank of Canada, TD Bank Group, Bank of Montreal, Scotiabank, CIBC, and National Bank of Canada.
- The first phase will focus on interbank transfers between these institutions.
- Tokenized deposits are regular bank deposits represented as digital tokens on a shared ledger, not new cryptocurrencies or CBDCs.
- The Office of the Superintendent of Financial Institutions (OSFI) clarified on September 10 that tokenized deposits are liabilities of the issuing bank, legally indistinguishable from traditional deposits.
Canada's six largest banks have announced a joint plan to explore a shared digital-dollar network for tokenized Canadian dollar deposits. The initiative, involving Royal Bank of Canada, TD Bank Group, Bank of Montreal, Scotiabank, CIBC, and National Bank of Canada, aims to create a more efficient system for interbank payments. The first phase will focus on enabling transfers between these participating institutions.
A tokenized deposit is described as a regular bank deposit represented as a digital token on a shared ledger, maintaining the same money, bank, and rules but using a different network. It is distinct from a new cryptocurrency or a central bank digital currency (CBDC). This project is separate from the Bank of Canada's previous consultation on a digital Canadian dollar, where a significant majority of respondents indicated they would not use such a currency.
Regulatory clarity on tokenized deposits was provided by the Office of the Superintendent of Financial Institutions (OSFI) on September 10. OSFI stated that these tokenized deposits are legally indistinguishable from traditional deposits and remain a liability of the issuing bank. This contrasts with stablecoins, which are separate digital assets backed by reserves.
Other banks are also pursuing similar initiatives. In the U.S., JPMorgan, Citi, Bank of America, and Wells Fargo are developing a tokenized deposit network through The Clearing House. Scotiabank and TD are also involved in building a U.S. dollar stablecoin. Bank of Montreal has already launched a tokenized cash platform with CME Group and Google Cloud for institutional clients.