Canada’s six largest banks have formed a joint project to test transfers of tokenized Canadian-dollar deposits between regulated financial institutions.
Summary
- Six major Canadian banks will jointly explore an interbank tokenized deposit system.
- The first phase will test transfers of digital bank deposits among participating institutions.
- Tokenized deposits remain bank liabilities, unlike separately issued stablecoins backed by reserve assets.
- The Canadian project could eventually connect with other bank-led digital asset networks.
TD Bank has announced that Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Scotiabank and Toronto-Dominion Bank Group will participate in the initiative. Other banks may join the project as it develops.
The lenders plan to begin with transfers of tokenized deposits among themselves, creating a common process for moving digital representations of Canadian-dollar bank balances. According to their joint statement, the first phase will focus on efficient circulation between Canadian financial institutions before any links are built to other digital asset programs.
Unlike a retail stablecoin or cryptocurrency, each tokenized deposit represents money already held at a participating commercial bank. Its value remains recorded as a liability of that bank, while digital ledger technology provides the infrastructure for transferring or programming the deposit.
Tokenized deposits could support round-the-clock bank payments
By representing conventional deposits digitally, the project could allow participating banks to process certain transfers outside the operating windows used by traditional payment systems. Programmable instructions could also release funds when agreed conditions are met, subject to each bank’s compliance and risk controls.
A shared network would address one of the limits of products operated by a single institution. When separate banks issue tokens only for their own clients, the funds may be unable to move directly to another bank’s platform without being converted or settled through existing systems.
Canada’s Big Six are instead exploring transfers between participating institutions from the project’s first phase. Their longer-term plan includes connecting the Canadian system with other digital asset programs, although the banks have not provided a timetable for testing, commercial deployment or outside access.
The initiative follows a regulatory clarification issued earlier in September. As crypto.news previously reported, Canada’s Office of the Superintendent of Financial Institutions said tokenized deposits are not legally different from conventional deposits merely because banks use blockchain or another digital system to represent them.
OSFI uses a technology-neutral approach, meaning it assesses the financial product rather than the technology used to deliver it. Banks must continue meeting the legal, operational, cybersecurity, and third-party risk requirements that apply to their existing deposit businesses.
The regulator also expects federally regulated institutions to contact their lead OSFI supervisors before introducing novel financial products or services. Its guidance points banks to the B-13 technology and cyber-risk guideline and the B-10 framework for managing outside service providers.
Canada’s tokenized deposit system differs from stablecoins
Tokenized deposits and stablecoins can both provide digital payments and programmable transfers, but their financial structures differ. A tokenized deposit remains a claim against the bank that issued it, just as money held in a conventional account remains a liability on the bank’s balance sheet.
Stablecoins are generally issued as separate tokens backed by cash, government securities or other reserve assets. Their legal status, redemption rights and regulatory treatment depend on the issuer and the rules covering the product.
Canada is developing a separate framework for fiat-backed stablecoins. The country’s 2025 federal budget included measures for a regulatory system administered in part by the Bank of Canada, with C$10 million allocated over two years beginning in 2026.
The planned rules would amend the Retail Payment Activities Act to cover payment providers handling stablecoin transactions. Bank of Canada Governor Tiff Macklem previously said stablecoins should maintain a one-to-one link with central bank currency, hold liquid government assets and give users clear information about redemption terms, costs and timing.
Canadian-dollar stablecoins are already entering regulated financial channels. In May, Anchorage Digital added institutional custody for CADD, a Canadian-dollar token issued by Tetra Digital Group and backed one-to-one by Canadian dollars held at a licensed trust company.
The Big Six project follows a different route because the participating banks would tokenize deposits they already hold instead of creating a separate reserve-backed asset. Each institution would retain responsibility for the deposit and the controls surrounding its transfer.
US banks are building a similar interbank network
Across the border, major American lenders are working on an interbank system with many of the same planned functions. In July, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo were reported to be developing a shared deposit network through The Clearing House.
The U.S. project is targeting the first half of 2027 and plans to offer multinational companies programmable treasury services, real-time liquidity management and cross-border transfers. More than a dozen other financial institutions, including TD Bank, BNY, HSBC, PNC, Truist and U.S. Bank, have supported the initiative.
JPMorgan and Citigroup already operate their own digital payment systems, but a shared network would allow tokenized deposits to move between participating banks. According to the earlier report, JPMorgan’s Kinexys platform processes more than $7 billion in average daily volume and has handled over $40 trillion since its launch.
Wells Fargo has also announced a separate product for corporate and commercial clients. Its planned tokenized deposit service will initially cover selected U.S. dollar-to-British-pound transactions before adding clients, countries and currencies during 2027.
For U.S. companies operating in Canada, compatible bank-led systems could eventually provide another route for moving funds between Canadian and American financial institutions. Neither project has announced a direct connection, and the Canadian banks have not identified which outside networks they may support.
Canadian banks build on Project Samara test
Canada’s latest bank-led project also follows the completion of Project Samara in March. The Bank of Canada, Export Development Canada, RBC Capital Markets, RBC Investor Services and TD Bank tested the issuance, trading and settlement of a C$100 million tokenized bond using distributed ledger technology.
Export Development Canada issued the bond with a maturity of less than three months to a closed group of investors. The Project Samara experiment used wholesale central bank deposits for payments and managed the security on a platform built with Hyperledger Fabric.
The system supported cash and bond issuance, bidding, coupon payments, redemption, secondary trading and settlement on connected cash and securities ledgers. According to the Bank of Canada, the test allowed transactions to settle directly on the platform.
Project Samara found improvements in operational efficiency, data integrity and transaction workflows, while the central bank also identified liquidity costs, governance demands and integration problems. The experiment reduced counterparty and settlement risk but introduced technology, audit and fallback risks, according to the Bank of Canada.