VersaBank, a Canadian digital bank focused on business clients, has commenced testing a unique tokenized deposit. This initiative aims to provide a more secure and compliant alternative to traditional stablecoins.

The U.S. pilot program is being conducted via the bank’s subsidiary, VersaBank USA, featuring a U.S. dollar token known as USDVB, representing a dollar on deposit at this branch.

Key Information:

• Tokenization Details: Each USDVB token signifies one U.S. dollar held within VersaBank USA.
• Testing Process: The pilot simulates transactions across Ethereum, Algorand, and Stellar blockchains, intending to serve as a substitute for stablecoins.
• Insurance and Interest: Unlike typical stablecoins, these tokens are federally insured, interest-earning, and will seek approval from the OCC before a full launch.

It is anticipated that the testing phase will conclude by the end of 2025, with intentions to explore banking regulations governing new financial products.

This development occurs as banks begin leveraging tokenized deposits to enhance the efficiency of money transfers, effectively competing with existing stablecoins which are usually issued by private firms and maintained with third-party custodians.

For more insights, please check related articles about the pressures of tokenization on existing financial systems.