Canada's OSFI says tokenized deposits are legally equivalent to bank deposits

The Canadian banking regulator has clarified that there is no essential legal difference between tokenized deposits and traditional deposits.

The Canadian banking regulator has clarified that tokenized deposits are no different from traditional bank deposits in the traditional legal sense. This stance provides a clearer path for federally regulated financial institutions to use blockchain and other digital technologies to develop deposit products.

The Financial Institutions Supervisory Authority of Canada (OSFI) points out that regardless of the technology used to issue or deliver tokenized deposits, their legal nature is different from traditional bank deposits. Canadian financial institutions still need to comply with existing legal, technical, cybersecurity and third-party risk management requirements. Banks are expected to communicate with their chief regulatory contact before launching new financial products or services.

This clarification is particularly timely as major banks around the world begin testing tokenized deposit payment and settlement systems based on blockchain infrastructure. OSFI said that with the development of digital finance, financial institutions and their third-party service providers are developing new products including tokenization and digital representative deposits. The agency's latest statement aims to clarify how existing federal financial institution laws apply when banks use new technology to provide such products.

Principle of technology neutrality: Focus on the nature of the product rather than the technical means

According to the principle of technology neutrality upheld by regulators, the technology used to build or deliver a financial product does not determine its legal attributes. OSFI emphasized that its review focuses on the essence of the product or service rather than the technical architecture behind it.

"For example, tokenized deposits are not legally different from traditional deposits." Regulators clearly pointed out. This means that just because a deposit is presented digitally or uses blockchain infrastructure does not make it a separate financial product category. Institutions offering the product remain accountable for complying with applicable legal and regulatory requirements for underlying banking.

OSFI treats tokenized deposits as existing bank deposits. This clarification puts the legal focus on underlying financial claims, and banks are free to use different technology systems as long as the products are within their licensed business. Financial institutions must ensure that products built with new technologies comply with applicable laws and regulations, even if part of the service is performed by an external company. OSFI specifically directs banks to refer to its B-13 guidelines on technology and cybersecurity risk management and B-10 guidelines on third-party risk management.

For banks considering launching new products or services, it is recommended to contact their OSFI chief regulatory contact before going public. Regulators encourage seeking legal advice where appropriate. This separation of the technology used to represent deposits from their legal status has become increasingly important as banks experiment with blockchain-based settlement systems.

The difference between the legal positioning of tokenized deposits and stablecoins

Tokenized deposits are still essentially commercial bank deposits, only presented as tokens on the digital ledger infrastructure and issued by banks that hold the underlying funds. Funds remain liabilities of commercial banks, rather than becoming independent tokens issued externally by banks and backed by reserves.

Although stablecoins can also leverage similar blockchain infrastructure, their structures are different. The legal treatment of stablecoins depends on the issuer and the framework governing the asset, while OSFI's latest clarifications specifically address deposits issued by federally regulated financial institutions.

Global banking industry promotes real-time payment testing of tokenized deposits

Banks outside Canada have moved beyond early experimental stages in 2026, and multiple projects are testing how existing commercial bank currencies can be circulated through blockchain infrastructure.

According to previous reports, Swift launched a blockchain ledger platform in July, and 17 banks from six continents are preparing to test tokenized deposit payments for round-the-clock cross-border settlement. Participating institutions include HSBC, Citi, BNP Paribas, UBS, Standard Chartered, ANZ and Singapore DBS.

The system took nine months to develop and aims to coordinate payments involving banks issuing digital deposits while retaining the compliance, risk control and control processes used by financial institutions. In August, the project entered the real-time transaction stage, and HSBC and Standard Chartered Bank connected their independently operated tokenized deposit platforms through Swift shared ledgers. HSBC records payment obligations through its tokenized deposit service, while Standard Chartered uses its own infrastructure. Swift ledgers match and net clear the obligations of both parties before settlement is completed through the existing banking system.

The transaction does not require two banks to issue deposits on the same tokenization platform. Instead, shared ledgers coordinate instructions between their separate systems, providing a model for interoperability between bank-operated digital currency networks. Swift has not announced a timetable for moving the system from controlled promotion to production-scale use. As the project progresses, participating banks are expected to test more institutions, currencies and operating conditions.

Other banking projects explore different structures for tokenized deposits

Other banking projects have taken different approaches to deploying commercial bank deposits on blockchain networks.

In June, Custodia Bank and Vantage Bank launched a dual-use token. The token operates as a bank deposit function within the Hazel Banking Network and becomes a stablecoin when transferred outside the alliance. The Ethereum-based system has been operating since March and participating banks are testing it ahead of its planned release in the fourth quarter of 2026. Hazel was originally designed to work with existing core banking software, payment systems and ledgers, rather than requiring participating institutions to replace their current infrastructure.

Another model focuses on transferring commercial bank funds over public blockchain networks. LayerZero and Keeta announced a system in July that aims to allow tokenized commercial bank deposits to be transferred between Ethereum, Solana, Base and Keeta Network. The plan service covers nine currencies, including Canadian dollars, U.S. dollars, euros, British pounds, Japanese yen and Hong Kong dollars. Tokens are backed by commercial bank deposits held through Bivo and its partner banking network, and issuers retain control of contracts, transfers and compliance requirements.

Canada is developing stable rules for fiat backed stablecoins

Canada's handling of tokenized deposits is evolving in parallel with the independent 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 the central bank's currency and backed by liquid government assets so that users can exchange for cash at face value. He pointed out that issuers should provide clear information on redemption terms, fees and timing, while maintaining sufficient operational resilience.

Canada's 2025 federal budget includes provisions to establish a new stablecoin regulatory framework. Starting in 2026, Bank of Canada is expected to receive C$10 million in funding over two years to manage the system. The proposed legislation would amend the Retail Payment Activities Act to cover payment service providers that process stablecoin transactions and add national security safeguards for fiat backed tokens.

Currently, Canadian metadata assets have been developed under existing regulatory structures. In May, Tetra Digital Group's CADD received institutional custody support from Anchorage Digital after it was structured into a one-to-one stablecoin backed by Canadian dollars held by licensed Canadian trust companies.

OSFI's latest statement specifically concerns deposits provided by federally regulated financial institutions. Banks developing new products still need to consult their chief regulatory contact before going public and comply with existing technical, cybersecurity and third-party risk management requirements of regulators.