OTTAWA — Canada’s banking regulator has clarified that tokenized bank deposits do not become a new type of financial product simply because they operate on blockchain or other digital infrastructure, potentially removing a regulatory uncertainty for banks exploring tokenized money, according to Yahoo Finance.
The Office of the Superintendent of Financial Institutions said Sept. 10 that the technology used to deliver a financial product does not determine its legal nature.
Under that approach, a traditional bank deposit represented by a digital token remains a bank deposit rather than becoming a separate crypto asset merely because it is recorded or transferred using distributed-ledger technology.
The clarification gives federally regulated Canadian financial institutions additional guidance as they consider blockchain-based banking products.
Regulator Taking Technology-Neutral Approach
OSFI is taking what it describes as a technology-neutral approach, focusing on what a financial product represents rather than the technology used to record, transfer or deliver it.
That means regulators would not create a separate legal category specifically for bank deposits represented on distributed ledgers.
A tokenized bank deposit remains a claim against a regulated financial institution. Tokenization instead changes how that claim can be represented, transferred or integrated with other financial infrastructure.
The distinction also separates tokenized bank deposits from crypto assets such as stablecoins issued by nonbank entities.
The Bank of Canada has similarly described tokenization as the process of representing traditional assets and records of their ownership on a digital ledger.
Central bank research has indicated tokenized systems could potentially accelerate settlement and reduce counterparty risks, although the benefits and risks depend on the design and legal structure of individual systems.
Existing Banking Rules Still Apply
OSFI’s clarification does not exempt tokenized deposits or other blockchain-based banking products from existing regulatory requirements.
Federally regulated financial institutions remain responsible for ensuring tokenized products comply with applicable federal laws and regulations.
OSFI specifically pointed to its framework governing technology and cyber risks and requirements involving risks associated with third-party service providers.
Banks also are expected to consult with their OSFI supervisors before introducing novel products or services.
The regulator’s position, therefore, represents a clarification of how existing banking requirements apply to new technology rather than a relaxation of regulatory oversight.
New Crypto Capital Rules Also Finalized
The clarification came as OSFI separately finalized updated capital and liquidity requirements governing banks’ exposure to crypto assets.
The regulator also announced Sept. 10 its final 2027 capital and liquidity rules for crypto assets, which are based in part on standards developed by the Basel Committee on Banking Supervision.
Those requirements determine how financial institutions must account for risks associated with different types of crypto-asset exposures.
The framework is scheduled to take effect in November 2026 or January 2027, depending on an institution’s fiscal year.
