Canada's Banks To Accept Tokenized Deposits

Canada's six leading banks are planning to launch a Canadian-dollar tokenized deposit system designed to move money faster between financial institutions.

The system that's being planned would eventually connect lenders such as Royal Bank of Canada (NYSE: $RY) and TD Bank (NYSE: $TD) with other digital asset initiatives.

The first phase of the project focuses on moving tokenized deposits across participating banks. A joint statement from the lenders said more banks could join the initiative later on.

Tokenized deposits are digital representations of money and other assets already held at a bank, rather than separate stablecoins issued by a cryptocurrency company.

Canada's six main banks dominant the country's financial system and offer consumer banking, commercial lending, capital markets, and wealth management.

The move to accept tokenized deposits comes after Canada's banking regulator said that tokenized deposits are "not legally distinct from traditional deposits."

The Canadian banks, which also include Bank of Montreal (NYSE: $BMO) and Scotiabank (NYSE: $BNS), said the project aims to offer faster, more efficient payments to Canadian customers.

The shared system being developed could enable Canadian banks to test 24/7 programmable payments while keeping customer funds within the banking system.

Canada's move comes as banks worldwide race to put deposits on blockchain infrastructure. In the U.S., regional lenders are building a similar shared tokenized-deposit network.

The biggest U.S. banks, such as JPMorgan Chase (NYSE: $JPM), are pursuing their own tokenized deposit system for institutional clients.

Canada is also developing a domestic stablecoin market.

In May of this year, Shopify (NASDAQ: $SHOP) and National Bank of Canada (TSX: $NA) launched a digital Canadian dollar that operates around the clock.