Tokenized Bank Deposits vs. Stablecoins: Why the Difference Matters for Canadian Finance

A growing number of articles describe banks launching or participating in tokenized deposit programs as a response to the rise of stablecoins.

There is some truth to this. Banks clearly want many of the capabilities associated with stablecoins. These include 24/7 availability, faster settlement, and programmable transfers. They would, however, prefer to provide these capabilities without surrendering their deposit franchise, compliance perimeter, or role as the primary intermediaries of commercial bank money.

Tokenized deposits are therefore an attempt to make traditional bank deposits usable within a tokenized financial system.

However, tokenized bank deposits and stablecoins are structurally very different instruments. They use different operating models, offer different levels of portability, and present very different implications for customers, banks, and financial-market competition.

They may increasingly compete for some of the same payment, liquidity, and settlement use cases. But they should not be treated as interchangeable forms of digital money.

Once the architectural differences are understood, it becomes easier to see why banks are prioritizing tokenized deposits and why stablecoins may present a much broader competitive threat to the traditional banking model.

Canada started experimenting early; but in a different direction

Canadian financial institutions have been experimenting with distributed ledger technology since at least 2016 through initiatives such as Project Jasper.¹

Project Jasper was primarily concerned with wholesale interbank settlement and the potential use of distributed ledgers within systemically important financial-market infrastructure. It was not the commercial development of a tokenized deposit product for Canadian consumers or businesses.

More recently, RBC and TD participated in Project Samara. This involved Export Development Canada issuing a tokenized Canadian dollar bond. The bond was issued and managed on distributed-ledger infrastructure, with payments settled using wholesale central-bank deposits.²

This was a meaningful Canadian development. It was still not the equivalent of a Canadian bank issuing tokenized commercial bank deposits to its customers. Project Samara focused on tokenized capital-market infrastructure and wholesale central-bank settlement money.

The Canadian approach has therefore generally been cautious, institutionally focused, and closely connected to the Bank of Canada, regulated financial institutions, and wholesale market infrastructure.

The United States followed a more commercial path

The United States moved earlier toward commercially deployed tokenized bank deposits.

JPMorgan announced JPM Coin in 2019 and moved it into commercial use in 2020.³ The product was designed to provide eligible clients with faster and more continuous movement of deposits within JPMorgan’s banking network.

In 2025, JPMorgan expanded the model by introducing JPMD on Base, Coinbase’s Ethereum Layer 2 blockchain, for approved institutional participants. This brought a JPMorgan deposit token onto public-blockchain infrastructure while retaining permissioning on both the sender and receiver sides.⁴

JPMD is not a stablecoin. It is a tokenized representation of a deposit liability owed by JPMorgan. Its holders must remain approved institutional participants. The token remains subject to the bank’s onboarding, compliance, and operating rules.

Nevertheless, it provides users with some stablecoin-like functionality:

near-instant settlement;
24/7 availability;
programmability;
on-chain transfer;
potential interoperability with other approved tokenized assets.

The important difference is that JPMD does not give customers unrestricted access to the broader on-chain economy. It gives them blockchain-based access to JPMorgan deposit money within a controlled institutional environment.

Why banks want tokenized deposits

The banks’ rationale is relatively straightforward.

Stablecoins demonstrate that digital money can be continuously available, programmable, and portable between different financial applications. Banks want to provide similar functionality while ensuring that customer balances remain bank deposits.

This allows the banks to preserve:

deposits as a source of funding;
customer relationships;
treasury-management revenues;
payment and foreign-exchange revenues;
compliance control;
the ability to determine which customers, wallets, and counterparties can use the network.

Tokenized deposits can also solve real problems for large institutional customers.

A multinational company, asset manager, or financial institution may need to move collateral outside normal banking hours, meet margin requirements across time zones, or transfer liquidity between different corporate entities. For these customers, an always available tokenized deposit could reduce operational delays and the amount of capital that must remain idle or pre-funded.

This is where the current Canadian commercial activity appears to be focused.

BMO has announced plans with CME Group and Google Cloud to provide institutional clients with tokenized cash capabilities for margin, collateral, and settlement. Its announced model initially allows eligible clients to convert U.S. dollars into tokenized instruments. It is intended to establish the foundation for broader tokenized-deposit services.⁵

BMO has also joined a U.S. bank-led initiative involving The Clearing House to develop interbank clearing and settlement of tokenized deposits. BMO describes the project as supporting real-time movement of bank deposits across institutions within an always-on financial ecosystem. Significantly, BMO’s public statement is attributed to its U.S. chief executive. This reinforces the North American and U.S.-institutional orientation of the initiative.⁶

This raises an important question for Canada.

Are Canadian banks developing tokenized deposits primarily to improve Canadian dollar financial services? Or are they doing so to protect their larger U.S. and cross-border institutional businesses?

At present, the latter appears to be the more immediate commercial driver.

Who actually benefits from tokenized deposits?

For large institutional customers, the benefits can be meaningful.

Tokenized deposits may provide:

continuous movement of liquidity;
faster collateral transfers;
automated treasury operations;
conditional or programmable payments;
settlement against tokenized securities;
fewer operational cutoff constraints;
potentially lower reconciliation costs.

The Bank of Canada’s participation in Project Agorá also illustrates the potential institutional case. The project combines tokenized commercial-bank deposits and wholesale central-bank money on a programmable platform intended to improve wholesale cross-border payments.⁷

These use cases are significant. Tokenized deposits should not be dismissed as merely a defensive response to stablecoins.

However, their benefits are likely to be distributed unevenly.

A Canadian customer whose financial activity primarily involves receiving Canadian dollar income, paying bills, using Interac, and holding funds in a conventional bank account may see very little immediate difference.

The underlying bank may operate more efficiently. The customer will not necessarily receive greater financial freedom.

A tokenized deposit may still be:

available only to approved customers;
transferable only to approved wallets;
confined to participating banks;
inaccessible to most public-blockchain applications;
subject to bank operating rules and account restrictions;
redeemable only through the issuing bank.

For most Canadian customers, tokenized deposits may therefore modernize the bank’s infrastructure without materially changing the customer’s ability to move money between competing financial products and service providers.

Tokenized deposits require more, not less, bookkeeping

A tokenized deposit does not remove the need for a bank ledger.

It introduces an additional ledger or state system that must remain synchronized with the bank’s existing books and records.

The blockchain may record that a token moved from one approved wallet to another. However, the bank’s book of record must continue to establish:

the identity of the depositor;
the amount of the bank’s legal liability;
the account or product against which tokens were issued;
the ownership category of the deposit;
the customer entitled to redemption;
any applicable interest and deposit-insurance treatment.

Every tokenized deposit must therefore ultimately be attributable to a recognized depositor and a liability recorded by the bank.

This does not necessarily mean that each wallet must map directly to an individual chequing account. A bank could use an omnibus account, a dedicated tokenized-deposit account, or a customer-level subledger.

However, the bank would still need to know which customer controls each approved wallet and what interest that customer has in the underlying deposit liability.

That is necessary to determine which accounts to debit or credit when tokens are issued, transferred, or redeemed. It is also necessary to establish legal ownership and determine the treatment of the deposit in the event of a bank failure.

In a 2026 proposed rule, the FDIC stated that the application of deposit insurance should not depend on the technology or recordkeeping used to record a bank’s deposit liabilities.⁸ Deposit insurance determinations nevertheless depend on the bank’s official records, the identity of the depositor, and the applicable ownership category.⁹

The blockchain balance cannot independently answer all of these questions.

The bank therefore has to reconcile at least two representations of value:

the bank’s authoritative liability and customer-account records; and
the blockchain record showing token issuance, ownership, and transfers.

This creates several operational questions:

What happens when the blockchain and the bank ledger disagree?
When is an on-chain transfer considered legally final?
Can the bank reverse or correct an erroneous transfer?
How are tokens handled if a wallet is compromised?
What happens if tokens are transferred during an outage in the bank’s internal systems?
Which record determines ownership if the systems become inconsistent?
How are balances treated during a bank resolution?

The bank’s official books will almost certainly remain the ultimate legal and accounting source of truth.

The blockchain is therefore not replacing the bank ledger. It is functioning as an additional transfer and ownership layer that must continuously reconcile with it.

This is not necessarily a reason to reject tokenized deposits. Banks already manage multiple ledgers, payment systems, and reconciliation processes. It does, however, weaken the suggestion that moving deposits onto a blockchain automatically creates a simpler or singular source of truth.

Permissioned does not necessarily mean private

Privacy is another material challenge.

Tokenized deposit networks are generally permissioned because the issuing bank must identify customers, screen counterparties, and comply with anti-money-laundering and sanctions requirements.

The bank will normally know the legal entity associated with each approved wallet. Other network participants may see only a blockchain address. The issuing bank must maintain the off-chain mapping between that address, the customer, and the underlying deposit liability.

This may protect the customer’s legal identity from the public. It does not necessarily protect the customer’s transaction activity.

Where tokenized deposits operate on a shared or public ledger, observers may be able to identify:

transaction amounts;
timing;
frequency;
relationships between wallets;
movements of collateral;
potential margin activity;
liquidity concentrations.

For an institutional customer, this information can be commercially sensitive.

A permissioned token can restrict who is allowed to send or receive it. That does not automatically make the underlying transaction confidential.

Banks may attempt to manage this through omnibus wallets, private ledgers, encrypted transaction data, net settlement, or privacy enhancing technology. Each solution, however, introduces additional complexity. It may reduce some of the transparency or composability that made the blockchain attractive in the first place.

Stablecoins offer a different proposition

Stablecoins are not simply tokenized bank deposits issued by a different type of company.

A tokenized deposit is a liability of a commercial bank. A stablecoin is generally a transferable claim on a stablecoin issuer, supported by a pool of reserve assets.¹⁰

A tokenized deposit is usually designed to remain within the regulated banking perimeter. A stablecoin is generally designed to circulate between different wallets, exchanges, custodians, and blockchain applications.

This difference in portability is fundamental.

Dimension	Tokenized bank deposit	Stablecoin
Issuer	Regulated bank	Stablecoin issuer
Holder’s claim	Claim against the bank	Claim against the issuer and its redemption structure
Backing	Bank’s balance sheet	Segregated or designated reserve assets
Primary legal record	Bank books and customer records	Token ownership plus issuer and reserve records
Access	Normally approved institutional customers	Potentially retail and institutional users
Transferability	Usually restricted to approved wallets or networks	Generally more widely transferable across supported networks
Interoperability	Often limited to the bank or participating institutions	Frequently available across wallets, exchanges and applications
Primary objective	Modernize bank money while preserving the deposit relationship	Provide portable digital fiat value outside a single bank’s ledger
Deposit insurance	Potentially available where the product legally qualifies as an insured deposit	Generally not deposit insured at the token-holder level
Strategic effect	Preserves the existing banking model	Can create financial activity outside traditional bank distribution channels

Both instruments can support 24/7 transfers and programmable payments. The principal difference is not the technology. It is the nature of the liability and the degree of control the customer retains over where the money can move.

The competitive threat from stablecoins

Stablecoins present a particular challenge to Canadian banks because they can open parts of Canada’s concentrated financial system to outside competition.

A customer holding a portable Canadian-dollar stablecoin could potentially move between different service providers without requiring each provider to establish a direct integration with every Canadian bank.

The stablecoin could become a shared settlement instrument used by:

payment companies;
foreign-exchange providers;
investment platforms;
tokenized funds;
lending protocols;
non-custodial treasury applications;
cross-border financial services.

These providers would not necessarily be unregulated. Depending on the activity, they could remain subject to securities, payments, anti-money-laundering, custody, or stablecoin regulation.

However, they would not need to be deposit taking banks. They would not necessarily need to distribute every product through the existing Canadian banking network.

As more financial assets move on-chain, stablecoins could also provide a common cash instrument for accessing tokenized money market funds, government securities, private market assets, and other real world assets.

This is where the strategic threat to banks becomes more significant.

The stablecoin is not simply competing with a bank payment product. It may allow customers to access an expanding range of financial products without returning to the bank’s proprietary ledger and product ecosystem for every transaction.

Tokenized deposits can offer some of the same technical functionality. They are generally designed to preserve the bank’s control over the customer, the wallet, and the permitted uses of the funds.

Canadian banks may innovate defensively, but first in the United States

Canadian banks are large North American financial institutions. Their strategic priorities cannot be understood solely through the Canadian retail-banking market.

They operate significant U.S. commercial-banking, capital-markets, and institutional businesses. Those clients participate in global markets where U.S. dollars, collateral, and trading activity increasingly need to move outside traditional banking hours.

It is therefore logical that Canadian banks would first deploy tokenized deposit capabilities where the commercial demand is strongest:

U.S. dollar settlement;
CME margin and collateral;
cross-border treasury operations;
institutional payments;
tokenized capital markets.

This does not mean that Canadian dollar tokenized deposits will not eventually be developed.

However, providing a meaningful Canadian dollar product would require more than creating a digital representation of an existing bank balance. It would require decisions about:

interbank interoperability;
settlement in central-bank money;
deposit insurance treatment;
common technical standards;
customer and wallet identity;
privacy;
access by non-bank service providers;
integration with Canadian dollar tokenized assets.

Without broader interoperability, a Canadian-dollar tokenized deposit may remain little more than an improved internal payment instrument for customers of the issuing bank.

It may increase efficiency without increasing competition.

Tokenization does not necessarily mean open finance

Tokenized deposits solve genuine problems. They can improve institutional settlement, collateral mobility, treasury management, and the operation of financial markets outside conventional banking hours.

For regulated institutions handling large values, the ability to use a bank-issued settlement asset within a controlled network may also be preferable to relying on a publicly circulating stablecoin.

Whilst tokenized deposits have benefits and value for their users, those benefits should not be confused with the more transformative and more competitive properties that stablecoins may offer consumers.

Tokenized deposits primarily modernize how bank money moves while preserving the existing relationship between the bank and its customer. Stablecoins can change where digital money moves, which products it can interact with, and which companies can build services around it.

For Canadian banks, tokenized deposits may represent a logical defense of their institutional payment and deposit businesses, particularly in the United States.

For Canadian customers, however, the more consequential issue is not whether their bank balance is eventually represented on a blockchain. They probably do not care about that detail.

It is whether tokenized Canadian dollars will be portable, interoperable, and usable across an open and competitive financial ecosystem. Or whether tokenization will simply recreate the existing banking network on a new technical ledger.

Aside: If you are interested in daily Canadian stablecoin activity, check out my Canadian Stablecoin Monitor.

References

Bank of Canada, “Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?”, June 2017. ↩
Bank of Canada, “Bank of Canada, Export Development Canada, RBC and TD successfully complete bond issuance experiment using distributed ledger technology”, March 5, 2026. ↩
Reuters, “JPMorgan Chase to create digital coins using blockchain for payments”, February 14, 2019; Banking Dive, “JPMorgan levels up on blockchain effort”, October 29, 2020. ↩
J.P. Morgan, “First bank issues USD deposit token on a public blockchain”, November 12, 2025. ↩
BMO, “BMO Introduces Tokenized Cash and Deposit Platform with CME Group and Google Cloud”, March 24, 2026. ↩
The Clearing House, “Major Financial Institutions Unveil Bank-Led On-Chain Money Initiative”, June 5, 2026. ↩
Bank of Canada, “Bank of Canada joins BIS Project Agorá to test improvements in wholesale cross-border payments”, May 27, 2026. ↩
Federal Deposit Insurance Corporation, “Notice of Proposed Rulemaking to Establish GENIUS Act Requirements and Standards for FDIC-Supervised Permitted Payment Stablecoin Issuers and Insured Depository Institutions”, April 7, 2026. ↩
Federal Deposit Insurance Corporation, “Deposit Insurance Basics”, updated May 29, 2024. ↩
Bank for International Settlements, “Blueprint for the future monetary system: improving the old, enabling the new”, Annual Economic Report 2023, Chapter III. ↩

Tokenized Bank Deposits vs. Stablecoins: Similar Technology, but Very Different Forms of Money