Canada’s federal banking regulator has formally clarified that tokenized deposits are not legally distinct from traditional bank deposits, giving federally regulated financial institutions clearer legal footing to develop blockchain-based deposit products.
In a statement published on September 10, the Office of the Superintendent of Financial Institutions (OSFI) said it takes a technology-neutral stance to permitted banking activities. “Tokenized deposits are, for example, not legally distinct from traditional deposits,” OSFI wrote. “We focus on what the product or service is, not how it is built or delivered.”
The clarification applies to institutions governed by the Bank Act, the Trust and Loan Companies Act, and the Insurance Companies Act. OSFI stressed that banks remain responsible for compliance with existing legal, technology, cyber and third-party risk requirements, including work performed by outside providers on their behalf. It pointed to guideline B-13 on technology and cyber risk management and B-10 on third-party risk management, and said institutions should consult their OSFI lead supervisors before launching novel products or services.
The statement comes as banks globally test tokenized deposit systems. In July, Swift launched a blockchain ledger with 17 banks across six continents preparing to test round-the-clock cross-border settlement. Participants included HSBC, Citi, BNP Paribas, UBS, Standard Chartered, ANZ and DBS. In August, HSBC and Standard Chartered connected their independently operated tokenized deposit platforms through Swift’s shared ledger, completing a live transaction without requiring both banks to use the same tokenization platform.
Other projects are also advancing. Custodia Bank and Vantage Bank have developed a dual-purpose token for their Hazel banking network, while LayerZero and Keeta announced a system to make tokenized commercial bank deposits transferable across Ethereum, Solana, Base and the Keeta Network, covering nine currencies including the Canadian dollar and U.S. dollar.
OSFI’s clarification is specific to deposits issued by federally regulated financial institutions and does not cover stablecoins. Canada is developing a separate stablecoin framework, with Bank of Canada Governor Tiff Macklem saying fiat-backed stablecoins should be pegged one-to-one to central bank currency and backed by liquid government assets. The regulatory clarity for tokenized deposits is expected to reduce uncertainty for Canadian banks exploring blockchain-based payments and settlement infrastructure.
