Canada's OSFI grants tokenized deposit bank status under new regulations in 2027

Canadian financial regulator OSFI establishes 2027 Capital and Liquidity Guidelines for Crypto Asset Exposures

Canada's banking regulator, the Office of the Regulation of Financial Institutions (OSFI), has formally confirmed its 2027 Capital and Liquidity Guidelines for Crypto Asset Exposures, introducing a clear framework for blockchain-based deposits for the country's banking industry.

Clarify the legal status of tokenized deposits

According to the new framework, as long as core rights and risks remain unchanged, eligible tokenized deposits will retain the same legal and processing treatment as traditional bank deposits. This means Canadian banks can record existing deposit claims on distributed ledger technology (DLT) without creating a separate regulatory category.

OSFI confirms that tokenized deposits are not legally different from traditional deposits if they maintain the same legal structure, redemption terms and protection for holders as traditional deposits. This approach reflects the technology-neutral stance taken by regulators when evaluating new settlement infrastructure.

OSFI's framework states that tokenized traditional assets must have the same rights as their standard equivalents, ensuring cash flow and claims in any bankruptcy scenario.

The guidance was released on September 10 and is directly aligned with global standards developed by the Basel Committee on Banking Supervision. Based on these criteria, eligible tokenized bank claims (including deposits) are classified as Group 1a if their credit risk and market risk are similar to traditional assets.

This distinction distinguishes tokenized deposits from stablecoins because deposits still represent direct claims on the issuing bank and reflect the institution's balance sheet and credit profile. In contrast, stablecoins are usually backed by external reserve assets and may receive different regulatory treatment. The focus of the OSFI rules is on the economic nature of the product rather than the specific blockchain infrastructure.

Liquidity, redemption and risk control measures remain in effect

To receive regulatory treatment similar to banks, tokenized deposits must strictly abide by legal enforceability and be redeemed at the face value of legal currency. The value of tokenized deposits must reflect the credit status and financial status of the issuing bank.

However, banks are not allowed to automatically classify their tokenized liabilities as retail deposits to calculate liquidity indicators. When new risk factors emerge (such as wallet providers, blockchain infrastructure or unusual redemption behavior) that may increase operational or liquidity risk, OSFI reserves the right to implement stricter regulatory treatment.

The 2027 update introduces further changes, including recognizing eligible cross-exchange hedging instruments as applicable to Class 2a crypto assets and removing some customer clearing derivatives from Class 2 exposure limit calculations.

OSFI explained that these amendments more closely match capital requirements to the risks actually borne by financial institutions. The framework maintains a technology-neutral foundation while ensuring enforceable legal rights, robust redemption processes, and adequate liquidity oversight.

Broader impact and ongoing surveillance

Canada has also participated in international research on tokenized finance and joined the Bank for International Settlements (BIS)'s Project Agorá this year, which aims to explore the use of tokenized commercial bank deposits and central bank currency to improve wholesale cross-border payments.

Although the scope of guidance has been expanded, OSFI clarified that prudential rules alone cannot determine whether the issuance of a particular tokenized product complies with the Banking Act. In addition, deposit insurance eligibility continues to be governed by existing Canadian legislation, and not all tokenized assets are eligible.

When the legal rights and associated financial risks of contemporary monetized deposits are consistent with traditional deposits, they can be classified as bank-like assets.

What ultimately emerged was a carefully defined approach: while tokenized deposits can modernize payment infrastructure, the way they are handled in prudential regulation depends on strict legal, risk and redemption requirements.