Canada’s OSFI grants bank-like status to tokenized deposits under 2027 rules

OSFI clarifies legal status for tokenized deposits

Under the new framework, qualifying tokenized deposits will retain the same legal and regulatory treatment as traditional bank deposits, provided their core rights and risks remain unaltered. This means Canadian banks can record existing deposit claims on distributed ledger technology (DLT) without creating a separate regulatory category.

OSFI confirmed that tokenized deposits are not legally distinct from conventional deposits if they maintain equivalent legal structures, redemption terms, and protections for holders. This approach reflects the regulator’s technology-neutral stance in evaluating new settlement infrastructures.

OSFI’s framework states that tokenized traditional assets must carry the same rights as their standard equivalents, ensuring access to cash flows and claims in any insolvency scenario.

The guideline, published on September 10, directly aligns with global standards set by the Basel Committee on Banking Supervision. Under these standards, qualifying tokenized bank claims—including deposits—fall into Group 1a when credit and market risks remain similar to traditional assets.

This distinction separates tokenized deposits from stablecoins, as deposits continue to represent direct claims on the issuing bank and reflect that institution’s balance sheet and creditworthiness.

Stablecoins, by contrast, are usually backed by external reserve assets and may receive different regulatory treatment. The focus of OSFI’s rules remains on the economic substance of the product rather than on specific blockchain infrastructures.

Mini dictionary: OSFI (Office of the Superintendent of Financial Institutions) is Canada’s federal agency that oversees and regulates federally registered banks and insurers to ensure their safety and soundness.

Liquidity, redemption, and risk controls remain in place

Bank-like regulatory treatment for tokenized deposits depends on strict adherence to legal enforceability and redemption at face value (par) in fiat currency. The value of tokenized deposits must reflect the creditworthiness and financial position of the issuing bank.

However, banks are not permitted to automatically classify their tokenized liabilities as stable retail deposits for liquidity calculations. OSFI retains the authority to impose stricter regulatory treatment when new risk factors—such as wallet providers, blockchain infrastructure, or unusual redemption practices—could heighten operational or liquidity risks.

The 2027 update introduces further changes, including the recognition of qualifying cross-exchange hedges for Group 2a crypto-assets and the removal of some client-clearing derivatives from the Group 2 exposure-limit calculation.

OSFI explained that these amendments align capital requirements more closely with the actual risks carried by financial institutions. The framework maintains a technology-agnostic foundation while ensuring enforceable legal rights, robust redemption processes, and adequate liquidity oversight.

Broader implications and ongoing supervision

Canada has also engaged in international research on tokenized finance, joining the Bank for International Settlements (BIS) Project Agorá this year to explore improvements in wholesale cross-border payments using tokenized commercial bank deposits and central bank money.

Despite the expanded guidance, OSFI clarified that prudential rules alone do not determine whether a specific tokenized product issuance is permissible under the Bank Act. Furthermore, eligibility for deposit insurance continues to be governed by existing Canadian legislation, and not every tokenized asset will qualify.

Qualifying tokenized deposits can be classified as bank-like assets when their legal rights and associated financial risks remain consistent with those of traditional deposits.

The result is a carefully defined approach: while tokenized deposits can modernize payments infrastructure, their treatment within prudential regulation depends on stringent legal, risk, and redemption requirements.