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The Ontario Securities Commission (OSC), the Autorité des marchés financiers (AMF) and the Canadian Investment Regulatory Organization (CIRO) have granted regulatory approval for Project Samara, an experimental research project evaluating the use of distributed ledger technology (DLT) in the Canadian bond market. The project is being conducted by a consortium comprising RBC Dominion Securities Inc. (a member of RBC Capital Markets), RBC Investor Services Trust, the TD Securities division of the Toronto Dominion Bank, TD Securities Inc., the Bank of Canada (BoC) and Export Development Canada (EDC).
Platform and scope
Project Samara centres on a platform operated by RBC that uses DLT to support end-to-end bond transactions, including tokenized bond issuance by EDC, bidding, coupon payment, redemption, secondary trading and trade settlement. Notably, settlement of bond trades on the platform uses digital representations of wholesale Canadian dollars created and managed by the BoC on the distributed ledger. The consortium intends to publish a research report setting out the key findings and assessing the benefits of issuing and trading bonds using DLT.
Regulatory framework
The approvals were facilitated through dedicated regulatory testing environments maintained by each of the participating regulators, namely OSC LaunchPad, the AMF Laboratory and CIRO's InnovateSafe. According to the OSC, the regulators granted novel exemptive relief for the tokenization pilot on the basis that investor protection and market integrity concerns were appropriately addressed. The regulators have signalled that they welcome further industry proposals for tokenization initiatives that leverage these testing environments.
Broader context
The announcement comes amid growing international consensus on the need for consistent regulatory outcomes and harmonised standards in the area of tokenization, including the creation, issuance or representation of assets using DLT. Financial institutions and asset managers globally are launching tokenized products, while central banks and regulators are exploring frameworks to support innovation without compromising investor protection or financial stability.
In a related development, the CSA have recently launched Project Tokenization as a new theme within the CSA Collaboratory. This initiative seeks to engage stakeholders in examining issues arising from the use of tokenized products and their intersection with Canadian securities laws, with a view to supporting informed, coordinated regulatory responses.
Key takeaways
Market participants active in Canadian capital markets should take note of the increasingly supportive regulatory posture towards DLT-based financial products in Canada. Project Samara represents a significant step in the practical testing of tokenized bond infrastructure, and the involvement of the BoC in providing digital representations of wholesale Canadian dollars on the ledger is a particularly notable feature. Firms considering tokenization initiatives in Canada may wish to explore the regulatory sandbox programmes offered by the OSC, AMF and CIRO, as well as the opportunities for stakeholder engagement through the CSA's Project Tokenization.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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