Canada's six largest banks are jointly exploring the development of tokenized Canadian dollar deposits to modernize the country's domestic settlement infrastructure, according to an announcement on Tuesday.
TD Bank, Royal Bank of Canada, Bank of Montreal, Scotiabank, National Bank of Canada and CIBC are collaborating on the initiative, which would allow participating banks to settle transactions using blockchain-based tokens representing Canadian dollars. The banks said they are in the exploration phase with no timeline or transaction metrics disclosed.
Tokenized deposits have gained traction among central banks and financial institutions globally as a potential settlement tool. The European Central Bank completed a pilot program for a digital euro wholesale settlement system in June. In April, the U.S. Federal Reserve Bank of New York published research on interbank settlement using tokenized central bank money, finding it could reduce settlement times from one day to near-instantaneous.
The announcement positions Canada's banking sector alongside peers already testing similar infrastructure. The project scope is limited to intra-Canada transactions in its first phase, with potential for broader expansion later. Payments Canada, the country's payments infrastructure regulator, has stated openness to blockchain-based settlement experiments.
Canada's banking system currently settles most large transactions through Payments Canada's systems, which operate on traditional databases. The country's retail payments are handled by Interac, which processes digital transfers. A tokenized deposit network would operate as a parallel settlement layer rather than a replacement for existing infrastructure, allowing banks to move deposits between accounts on a distributed ledger.
The Big Six control approximately 80 percent of Canada's banking assets. Their joint exploration reflects consensus among the country's largest financial institutions on the need to modernize settlement, though the collaborative structure may reflect a desire to avoid regulatory scrutiny that could accompany a single-bank initiative.
The six banks represent a combined CAD 5.5 trillion in total assets. Settlement modernization has become a priority for G7 banking systems over the past three years, driven by both competitive pressure from fintech entrants and recognition that existing infrastructure was designed before real-time payments became standard. If the banks move from exploration to development, the project would likely require approvals from Canada's federal banking regulator and the Office of the Superintendent of Financial Institutions.
Bank of Canada Governor Tiff Macklem said in a July speech that wholesale tokenized deposits "could help Canada's financial system be more efficient and competitive." The central bank has not announced plans to issue a central bank digital currency for retail use.
