Canada’s Office of the Superintendent of Financial Institutions (OSFI) has issued a statement on tokenized deposits clarifying that the use of blockchain technology does not change the nature of a deposit. It is one thing to provide a supervisory interpretation of the Bank Act, as is the case here, but it does not change any laws and the regulator itself advises banks to seek legal advice where appropriate. It also does not clarify the position for deposit insurance, which falls under the remit of the Canada Deposit Insurance Corporation (CDIC). The CDIC Act’s definition of deposit appears technology neutral, but the corporation has not explicitly addressed tokenized deposits.
“The underlying technology of a financial product or service does not determine its legal nature. To be clear, we focus on what the product or service is, not how it is built or delivered. Tokenized deposits are, for example, not legally distinct from traditional deposits,” the statement reads.
Other jurisdictions are taking different routes to provide greater clarity. Canada’s approach is the fast one, with the supervisor saying existing law already covers tokenized deposits. The US is taking the slower but more durable route of writing it into statute and regulation. The GENIUS Act contains a provision allowing banks to use distributed ledgers for representing deposits as digital assets and for their books and records. The FDIC’s proposed GENIUS Act rulemaking went further, clarifying that deposit insurance applies regardless of the technology used to record deposits. The proposal received input from multiple industry bodies.
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