The regulatory agency of the Bank of Canada recently clarified that tokenized deposits will not change their legal nature just because blockchain accounting methods are used. This statement provides a clearer regulatory foundation for banks to develop on-chain deposit, payment, and settlement products.
The Financial Institutions Supervision Agency of Canada (CSA), also known as OSFI, issued a statement on September 10 stating that when assessing a financial product, one should consider its essence rather than the technology it uses. The agency indicated that tokenized deposits are not legally different from traditional deposits.
Still considered bank liabilities
According to this definition, as long as a product is essentially a deposit, even if it is recorded or transferred through blockchain, it can still be considered an ordinary bank deposit and continues to constitute a liability of the issuing bank.
This means that when designing related products, Canadian federal regulatory banks do not need to fall under a completely new set of legal categories simply because they use blockchain technology. For the banks, this helps to reduce uncertainties in product design and compliance assessments.
Existing regulatory requirements continue to apply.
However, this does not mean that banks can directly launch new products in the absence of regulatory communication. OSFI indicates that federally regulated financial institutions still need to comply with existing laws and regulatory requirements when developing tokenized deposit products.
- B-13 Technical and Cybersecurity Risk Management Requirements
- B-10 Third-Party Risk Management Requirements
- Communicate with supervisory authorities before launching new or unconventional products.
OSFI also mentioned that if necessary, institutions can seek legal advice regarding specific legal issues.
Distinguish from stablecoins
This explanation also specifically distinguishes between tokenized deposits and stablecoins. According to regulatory definitions, tokenized deposits are essentially a digital representation of traditional bank deposits, and the holders have direct claims against the issuing bank.
Its value and legal status come from the bank deposits themselves, not from blockchain technology. OSFI also indicates that as long as the relevant bank claims are legally established, can be exchanged for legal tender at face value, and are supported by the issuing bank, they can be recognized as valid tokenized bank claims.
From an industry impact perspective, this stance may increase the willingness of Canadian banks to test blockchain-based payment, settlement, and deposit products, while also avoiding the need to establish separate legal classifications with each new technology introduced.
