Canada's OSFI grants tokenized deposit banks treatment under new regulations in 2027

TLDR： OSFI's 2027 new regulations ensure bank-like treatment for tokenized deposits

Liquidity, redemption rights and legal rights remain key constraints

According to the 2027 new regulations issued by the Office of the Financial Services Supervisory Authority of Canada (OSFI), eligible tokenized deposits can continue to enjoy bank-like regulatory treatment as long as legal rights remain intact. Eligible deposit tokens are classified into "Group 1a" and usually enjoy the same credit risk treatment standards as traditional deposits.

Banks must ensure that these tokenized deposits can be redeemed at face value, are legally binding, and are linked to the creditworthiness of the issuer. However, if wallet services, blockchain networks or redemption structures introduce additional risks, OSFI has the right to impose stricter liquidity regulatory requirements.

Technology neutrality: tokenized deposits have the same legal status as traditional deposits

Canada's banking regulator has clearly drawn the boundaries of blockchain-based deposits, indicating that under the premise that underlying bank claims remain unchanged, the application of technology will not change its nature. In this context, the Office of the Financial Services Supervision officially released the "2027 Crypto Asset Capital and Liquidity Guidelines" on September 10.

This framework allows eligible tokenized deposits to continue to be classified as "tokenized traditional assets" while retaining ordinary deposit rights and risks. This means Canadian banks can represent existing deposit claims on distributed ledgers without automatically creating separate prudential regulatory categories.

OSFI emphasized that tokenized deposits are not legally different from traditional bank deposits, which strengthens its technology-neutral regulatory approach. For banks, this provides a path to modernize settlement infrastructure without changing the regulatory status of deposits.

Core principles: Legal structure and redemption terms determine regulatory treatment

Under this framework,"tokenized traditional assets" must provide the same legal rights as their traditional counterparts. For bank deposits, these rights include access to cash flow and claims in bankruptcy liquidation.

In addition, tokens must not introduce any features that materially weaken the bank's ability to fulfill its obligations. Products that meet these tests will be placed in "Group 1a" and will typically receive the same credit risk treatment as traditional assets. This position is closely consistent with the Basel Committee's standards on tokenized financial instruments. When credit risk and market risk are comparable, the Basel Committee also places eligible tokenized bank claims (including deposits) in Group 1a.

This classification distinguishes tokenized deposits from many stablecoins. Tokenized deposits are claims filed directly with the issuing bank and depend on the institution's balance sheet and credit standing, while stablecoins may rely on separate reserve assets and may receive different prudential regulatory treatments. Therefore, the focus of regulation is on the essence of the economy rather than whether blockchain technology is used.

Liquidity and risk controls remain strict

Although bank-like treatment is enjoyed, this does not mean the elimination of liquidity or risk control measures. OSFI requires that eligible tokenized bank claims must be legally binding and can be converted into fiat at face value. Its value must also reflect the credit status and asset liability status of the issuing bank.

Despite this, banks cannot automatically treat their own tokenized liabilities as stable retail deposits to calculate liquidity indicators. When wallet providers, blockchain operators, or redemption structures introduce additional operational or liquidity risks, regulators can apply a more stringent approach. This brings technology-related risks into the prudential regulatory framework and avoids neglect.

The 2027 update also recognizes qualified cross-exchange hedging transactions for Group 2a crypto assets and removes certain customer clearing derivatives from Group 2a exposure limit calculations. OSFI said the changes better align capital requirements with the risks banks actually take. Overall, the framework combines technology-neutral treatment with specific safeguards around legal enforcement, redemption and liquidity.

Future Outlook: Beyond domestic bank balance sheets

Canada is exploring tokenized finance beyond domestic bank balance sheets. In May, the Bank of Canada joined the BIS project Agorá, which is testing tokenized commercial bank deposits using wholesale central bank currency.

It should be noted that OSFI's guidelines do not authorize all types of tokenized products. Regulators have made clear that their prudential rules do not determine whether the Banking Law allows specific issues. Deposit insurance eligibility remains governed by existing Canadian law.

To sum up, this is a narrow but important rule: as long as legal rights and financial risks remain unchanged, eligible tokenized deposits can receive bank-like treatment.