Canada's six largest banks are set to initiate a tokenized deposit system aimed at facilitating quicker money transfers between financial institutions while eventually integrating with other digital asset systems.
This effort, announced by TD Bank, will commence with a phase focused on transferring digital representations of bank deposits among participating banks, with aspirations to connect to broader digital asset initiatives in the future.
The joint venture includes the Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Scotiabank, and TD Bank Group. The initial phase will specifically test the movement of tokenized deposits across these institutions, with the possibility of other banks joining later.
According to the banks, "The first phase of the project aims to move tokenized deposits efficiently across Canadian financial institutions with a longer-term goal to connect with other emerging digital assets initiatives." This collaboration represents the Big Six banks, which dominate Canada’s banking landscape, engaging in sectors ranging from consumer banking to wealth management.
The banks believe this initiative could enhance payment processes, providing faster, programmable, and continuous payment options while ensuring that customer funds remain within the regulated banking framework.
Tokenized deposits refer to digital equivalents of existing bank assets rather than separate stablecoins from crypto firms. This shared system could allow Canadian banks to experiment with around-the-clock programmable payments while maintaining regulatory compliance.
This initiative aligns with a global trend as banks worldwide strive to integrate deposits with blockchain technology. In the U.S., regional banks are developing a similar tokenized-deposit network, while major institutions like JPMorgan, Citi, and Wells Fargo are pursuing their own blockchain projects. Additionally, Swift has begun testing tokenized deposits for 24/7 international payments with various banks globally.
The project also contributes to Canada's expanding focus on tokenized financial markets. Earlier this year, the Bank of Canada, RBC, and TD successfully completed Project Samara, which involved issuing, trading, and settling a CA$100 million bond (approximately US$71 million) on a blockchain using tokenized wholesale Canadian dollars.
Furthermore, Canada is working on establishing a domestic stablecoin market. In May, Shopify and the National Bank of Canada supported a regulated digital Canadian dollar intended for continuous operation.
While the six-bank initiative does not commit them to issuing a tokenized deposit just yet, it signifies a collaborative effort among Canada’s largest banks to explore a shared digital currency framework, rather than allowing Canadian-dollar activities on blockchain solely to stablecoin issuers.