Canada’s six biggest banks to build tokenized loonie network

Canada’s six largest banks announced a collaboration to build a shared tokenized version of the Canadian dollar and to test new payment and settlement arrangements. The banks are Royal Bank of Canada, Toronto-Dominion Bank, Scotiabank, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada.

The initiative will create common technical infrastructure to enable faster and more efficient transfers denominated in Canadian dollars. Target use cases include interbank settlement, commercial payments and corporate liquidity management, with the aim of delivering near-instant finality and lower operational complexity between participating institutions.

Participating banks will jointly design governance, technical standards and operational rules for the network and run pilot programs to validate real-world use cases. Work planned for the pilots includes testing tokenized cash instruments, secure digital wallets for institutional clients and application programming interfaces that let corporate and institutional systems connect to the network.

Pilots will be phased, beginning with controlled experiments among participating members and expanding to broader trials if tests succeed. The banks plan to coordinate with federal regulators and payments authorities as the project progresses to ensure compliance with anti-money-laundering rules, payment-system oversight and consumer-protection requirements.

The network will be built to be compatible with existing clearing and settlement arrangements and to support interoperability with current payment rails used by Canadian businesses and consumers.

The banks expect the network could shorten settlement times for wholesale transactions, reduce the need for prefunded accounts and improve real-time visibility into liquidity for treasurers and banks. They also anticipate use cases such as programmable payments that execute when agreed conditions are met and tokenized representations of other assets that can settle against digital dollars.

The initiative follows central bank research in Canada into central bank digital currency concepts and broader industry experiments with tokenized money. The banks say their work will explore private-sector technical options and market models that could complement public efforts.

Under the consortium model, the banks will share development costs and establish common standards while each institution retains responsibility for its client relationships and risk management.