Canada’s banking regulator has clarified that tokenized deposits are not legally different from traditional deposits, giving federally regulated financial institutions a clearer path to develop deposit products using blockchain and other digital technology.
Summary
- OSFI said tokenized deposits are not legally distinct from traditional bank deposits, regardless of the technology used to issue or deliver them.
- Canadian financial institutions remain responsible for meeting existing legal, technology, cyber and third party risk requirements.
- Banks are expected to consult their OSFI lead supervisors before launching novel financial products or services.
- The clarification comes as banks globally test tokenized deposits for payments and settlement using blockchain infrastructure.
The Office of the Superintendent of Financial Institutions said financial institutions and their third-party providers have been developing new financial products as digital finance advances, including tokenized and other digitally represented deposits. OSFI said its latest statement was intended to clarify how existing federal financial institution laws apply when banks use new technology to offer such products.
Under the regulator’s technology-neutral approach, the technology used to build or deliver a financial product does not determine its legal nature. OSFI said it looks at what a product or service is instead of the technology behind it.
“Tokenized deposits are, for example, not legally distinct from traditional deposits,” the regulator said.
The position means a deposit does not become a separate type of financial product simply because it is represented digitally or uses blockchain infrastructure. The institution offering the product remains responsible for meeting the laws and regulatory requirements that apply to the underlying banking activity.
OSFI treats tokenized deposits as existing bank deposits
OSFI’s clarification places the legal focus on the underlying financial claim, leaving banks free to use different technical systems as long as the product remains within their permitted activities.
Financial institutions must ensure that products built with new technology comply with applicable laws and regulations, including when outside companies perform parts of the service on their behalf. OSFI specifically pointed banks to its B-13 guideline covering technology and cyber risk management and B-10 guideline for third-party risk management.
Banks considering novel products or services are expected to contact their OSFI lead supervisors before launch. The regulator encouraged institutions to seek legal advice where appropriate.
The approach separates the technology used to represent a deposit from its legal status, a distinction that has become more relevant as banks experiment with blockchain-based settlement systems.
A tokenized deposit remains a commercial bank deposit represented on digital ledger infrastructure and issued by the bank holding the underlying funds. The money remains a liability of the commercial bank instead of becoming a separate reserve-backed token issued outside the bank.
Stablecoins can use similar blockchain infrastructure but are structured differently. Their legal treatment depends on the issuer and the framework governing the asset, while OSFI’s latest clarification specifically concerns deposits issued by federally regulated financial institutions.
Tokenized bank deposits move into live payment tests
Banks outside Canada have moved beyond early experiments with tokenized deposits during 2026, with several projects testing how existing commercial bank money can move through blockchain infrastructure.
In July, Swift launched a blockchain ledger with 17 banks across six continents preparing to test tokenized deposit payments for round-the-clock cross-border settlements, as crypto.news previously reported. Participating institutions included HSBC, Citi, BNP Paribas, UBS, Standard Chartered, ANZ and DBS.
The system was developed over nine months and was designed to coordinate payments involving bank-issued digital deposits while retaining the compliance, risk and control processes used by financial institutions.
That work moved into a live transaction in August when HSBC and Standard Chartered connected their independently operated tokenized deposit platforms through Swift’s shared ledger.
HSBC recorded its payment obligation through its Tokenised Deposit Service, while Standard Chartered used its own infrastructure. Swift’s ledger matched and netted the obligations before settlement took place through existing banking systems.
The transaction did not require both banks to issue deposits on the same tokenization platform. Instead, the shared ledger coordinated instructions between their separate systems, providing a model for interoperability between bank-operated digital deposit networks.
Swift has not disclosed a deadline for moving the system from its controlled rollout into production-scale use. Its participating banks are expected to test more institutions, currencies and operating conditions as the project develops.
Banks are testing different tokenized deposit structures
Other banking projects have taken different approaches to putting commercial bank deposits on blockchain networks.
In June, Custodia Bank and Vantage Bank unveiled a dual-purpose token designed to function as a bank deposit while held inside their Hazel banking network and become a stablecoin when transferred outside the consortium.
The Ethereum-based system had been operating since March and was being tested by participating banks ahead of a planned fourth-quarter 2026 launch. The companies designed Hazel to work alongside existing core banking software, payment systems and ledgers instead of requiring participating institutions to replace their current infrastructure.
Another model has focused on moving commercial bank money across public blockchain networks. LayerZero and Keeta announced a system in July intended to make tokenized commercial bank deposits transferable across Ethereum, Solana, Base and the Keeta Network.
The planned service covers nine currencies, including the Canadian dollar, U.S. dollar, euro, British pound, Japanese yen and Hong Kong dollar. Commercial bank deposits held through Bivo and its partner-bank network back the tokens, while issuers retain control over contracts, transfers and compliance requirements.
Canada is developing separate rules for stablecoins
Canada’s treatment of tokenized deposits is developing alongside a separate regulatory process for fiat-backed stablecoins.
Bank of Canada Governor Tiff Macklem said in December 2025 that stablecoins should be pegged one-to-one to central bank currency and backed by liquid government assets so users can redeem them for cash at par. He said issuers should provide clear information about redemption terms, fees and timing while maintaining sufficient operational resilience.
Canada’s 2025 federal budget included provisions for a new stablecoin regulatory framework, with the Bank of Canada expected to receive C$10 million over two years beginning in 2026 to administer the regime.
The planned legislation would amend the Retail Payment Activities Act to cover payment service providers handling stablecoin transactions and include national security safeguards for fiat-backed tokens.
Canadian-dollar digital assets are already being developed under existing regulatory structures. Tetra Digital Group’s CADD gained institutional custody support from Anchorage Digital in May after being structured as a Canadian-dollar stablecoin backed one-to-one by Canadian dollars held at a licensed Canadian trust company.
OSFI’s latest statement deals specifically with deposits offered by federally regulated financial institutions. Banks developing novel products remain expected to consult their lead supervisors before launch and comply with the regulator’s existing technology, cyber and third-party risk requirements.
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