Today Canada’s biggest banks announced a joint tokenized deposit initiative for Canadian dollars, citing programmability benefits. Last week Canada’s main banking regulator, OSFI, confirmed that tokenized deposits are not legally distinct from conventional deposits.
The six banks involved are the Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), National Bank of Canada (NBC), Royal Bank of Canada (RBC), the Bank of Nova Scotia (Scotiabank) and TD Bank Group (TD). The banks said they anticipate the inclusion of other deposit taking institutions at the appropriate time. The first phase aims to move tokenized deposits across Canadian financial institutions, with a longer term goal to connect to third party digital asset initiatives.
To date most tokenized deposit initiatives have been conducted by single banks such as JP Morgan, Citi and HSBC, with BMO joining the fray recently. Single bank solutions have proven popular because they are far simpler. Transfers between banks require both a token movement for customers and a second step for interbank settlement. That can take place either via a conventional RTGS payment or via a wholesale CBDC or tokenized reserves. Earlier this year the Bank of Canada completed Project Samara, a wholesale CBDC initiative focused on the settlement of digital bonds.
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