TD tests tokenised deposits via BIS Project

TD Bank has completed a test moving real US dollar funds using tokenised deposits on the Project Agorá platform. The transaction was executed between two of the bank's domestic US entities in partnership with Bank of New York Mellon.

According to the bank, this test demonstrates the ability to issue tokenised money on the Agorá platform and facilitate the instant movement of funds with atomic settlement. TD argues this highlights the benefits of distributed ledger technology (DLT) and the feasibility of conducting real-money transactions between entities using the system.

Project Agorá's role

Project Agorá is a public-private initiative convened by the Bank for International Settlements (BIS). It has been exploring for years how digital forms of existing money and new payment technology could help improve wholesale cross-border payments. The platform serves as a testing ground for financial institutions to experiment with tokenised deposits and other digital monetary innovations.

Carolyn Weinberg, chief product and innovation officer at BNY Mellon, commented on the initiative's potential. "Project Agorá highlights the potential of tokenised deposits making cross-border payments more efficient, transparent and resilient," she said.

Industry testing and adoption

TD's test is not an isolated event within the Project Agorá framework. Earlier this year, Lloyds Banking Group and Caixabank also completed tokenised deposit transactions through the same BIS initiative. These tests collectively represent steps by traditional banking institutions toward understanding and potentially adopting new payment infrastructures.

A legal commentator, Shahid Jamal Tubrazy of Crypto Law Consult, noted the significance of such developments. He described TD's move as "a meaningful step toward institutional adoption of tokenised money." Tubrazy further pointed out that atomic settlement can reduce reconciliation, counterparty and settlement risks in wholesale payments.

Challenges and future tests

The broader challenge for these models lies in their operation across different jurisdictions and regulatory frameworks. Project Agorá is positioned as a potential bridge between traditional banking infrastructure and new DLT-based systems. Its success in facilitating real-money transactions between domestic entities like those of TD provides a foundational case study.

The test involved moving funds between two domestic US entities, which simplifies the regulatory environment compared to a cross-border transaction. The next phase of testing will likely need to address the complexities of international payments, where differing national regulations and monetary policies come into play. The BIS initiative aims to explore these very challenges as part of its multi-year research into improving the global payments system.