Canada's major banks have partnered to explore a Canadian-dollar denominated tokenized deposit solution as a first step towards modernizing domestic payment infrastructure.

The six largest Canadian banks--Bank of Montreal, National Bank of Canada, Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank--have formed a joint project to develop these digital money solutions.

Tokenized deposits are digital tokens issued by regulated banks that represent a direct one-to-one claim on traditional cash deposits that would be issued on a blockchain. The initiative aims to speed up and make more efficient and programmable payments to Canadian customers that fall under Canadian regulations.

The first phase of the project would be to move tokenized deposits efficiently across Canadian financial institutions with a longer term goal of connecting other similar digital asset initiatives.