Big banks exploring Canadian dollar-based digital money with tokenized deposits

TORONTO — Canada's major banks are looking into the creation of a Canadian dollar-based digital currency, beginning with a pilot program focused on tokenized deposits. Tokenized deposits function like conventional bank deposits but are documented on a decentralized database or distributed ledger, such as blockchain. The objective is to provide Canadian customers with quicker, more efficient, and programmable payments while maintaining financial stability and regulatory oversight, according to Claire Célérier, a Canada Research Chair in household finance at the University of Toronto's Rotman School of Management.

Célérier explained that the six participating banks—Bank of Montreal, CIBC, National Bank, Royal Bank, Scotiabank, and TD Bank—intend to utilize a shared blockchain, enabling instant transactions between wallets with tokens. These tokens would be issued by commercial banks, and legally, depositors would be able to treat them similarly to traditional bank deposits.

The collaborative project aims to cater to large companies and institutional investors, facilitating more intricate transactions. Célérier anticipates that these tokenized dollars will predominantly benefit large corporations with accounts across these Canadian banks, enabling them to transfer substantial sums of money. Additionally, the initiative could enhance international transfer efficiency.

The banks emphasize that the initial phase focuses on transferring tokenized deposits among Canadian financial institutions. Célérier noted that this is still an exploratory phase, and the banks are cooperating to develop the underlying technology.