Canadian banks to issue tokenized deposits

Several Canadian banks announced plans to issue tokenized deposits, digital representations of bank deposits recorded on a permissioned distributed ledger. The banks said the tokens will be fully backed by conventional deposits and redeemable at par in Canadian dollars at the issuing bank. The project is intended to speed interbank settlement and support integration with institutional digital-asset services in Canada.

Each tokenized deposit will be a liability on the issuing bank’s balance sheet and exist as a digital token on a permissioned ledger accessible to identified financial institutions and regulated intermediaries. Holders will be able to transfer tokens peer-to-peer on the ledger while the issuing bank remains responsible for redemptions into conventional Canadian dollars. The design preserves existing depositor protections and regulatory obligations.

Participating banks plan controlled pilots before any wider rollout. The pilots will test onboarding and identity verification, cross-ledger interoperability, liquidity management, reconciliation with existing payment systems, and operational links to custody and treasury platforms. Technology providers are building ledger infrastructure and token-management tools, and market infrastructure firms are exploring connections with clearing and settlement systems.

Use cases under consideration include tokenized settlement for securities transactions, collateral movements and interbank funding. Participants will engage with Canadian banking regulators, securities supervisors and other overseers during testing to address prudential, anti-money-laundering and consumer-protection requirements and to confirm how existing rules apply to tokenized instruments.

Participants distinguished tokenized deposits from privately issued stablecoins and a central bank digital currency. Tokenized deposits remain liabilities of the issuing bank and subject to that bank’s regulatory oversight. Stablecoins are typically issued by non-bank entities and depend on issuer-specific reserve arrangements. A central bank digital currency would be a direct liability of the central bank.

Participants described the pilots as part of wider industry work to test technical and legal questions around digitizing assets and payments. Industry participants have pointed to possible benefits such as faster settlement and lower operational costs, and to concerns including operational risk, legal clarity and the need to preserve deposit safety and financial stability. The pilots are restricted to controlled testing before any expansion to corporate or retail clients.