Digital assets have largely achieved the mainstream adoption the industry has long hoped for. However, this success has created a new challenge for banks, raising concerns that vital customer deposits could be siphoned off by crypto firms.
That pressure has made modernization imperative. One of the central debates for banks is whether to leverage existing infrastructure, such as the Solana blockchain or Circle’s USDC stablecoin, or to build proprietary digital assets solutions.
Currently, many of the largest U.S. banks appear to be pursuing a hybrid strategy. According to the Wall Street Journal, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo—among others—plan to launch a tokenized deposit network next year via The Clearing House, a consortium that also operates RTP.
The new system is expected to integrate traditional payment rails with blockchain infrastructure, with the digital asset components managed by a yet-unnamed partner. Regardless of the vendor, this initiative represents a milestone for the traditional financial services industry.
“This is a big development because it shows that banks are treating blockchain as better financial infrastructure,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “Tokenized deposits give banks a way to deliver some of the same benefits associated with stablecoins, like faster settlement and 24/7 availability, while keeping the deposit inside the regulated banking system.”
Opening the Floodgates
Many banks were initially reluctant to engage with decentralized finance products, largely due to the lack of clear regulation in the sector’s early stages. Following the passage of the landmark GENIUS Act last year, which regulated stablecoins in the U.S., institutional interest accelerated significantly.
The GENIUS Act defined rules around stablecoin issuance, trading, and custody, effectively opening the floodgates for banks and fintechs to launch stablecoins and invest in blockchain infrastructure.
This includes several banks within the Clearing House consortium. For example, JPMorgan Chase launched one of the world’s first bank-run blockchains—now known as Kinexys—and followed it with JPM Coin, a digital asset used for wholesale payments and foreign exchange transactions. The bank has also signaled that it could launch a full-scale stablecoin in the future.
Citigroup, meanwhile, has said it is evaluating a broader digital assets strategy that could include stablecoins, fiat and digital currency on- and off-ramps, and crypto custody services. However, it has indicated that, among these options, tokenized deposits are best aligned with its priorities.
Keeping Deposits Protected
This view is echoed across much of the banking sector, where tokenized deposits as often seen as preferable to stablecoins for institutional use cases. Unlike stablecoins, which are issued by private firms, tokenized deposits represent funds already held within a regulated financial institution.
They also keep funds within the banking system, a key concern for banks as crypto players expand their footprint.
This concern has also surfaced in debates around the CLARITY Act, a bill aimed at regulating the broader U.S. digital assets industry. Many institutions have lobbied to limit the ability of stablecoins to offer yield or rewards, out of concern that these incentives could draw deposits away from traditional banks.
Similarly, banks have raised concerns after the emergence of limited or “skinny” master accounts, which grant fintechs—including crypto firms—direct access to the U.S. Federal Reserve that was previously only available to banks.
Reinforcing the Role of Banks
These developments have pushed traditional financial institutions to reinforce their role in the global financial system.
The Clearing House network may represent a strong step in that direction. The consortium expects large global corporations to be the primary users of its tokenized deposit network, with applications including liquidity management and cross-border payments.
However, the network could face adoption challenges, the most significant of which ma be awareness and market education.
“Where I do think there remains some skepticism is in looking for demand from customers as a driver for tokenized deposits,” Wester said. “Corporate clients may not be asking for ‘tokenized deposits’ by name, but they are absolutely asking for the outcomes tokenized deposits are meant to provide. They want faster settlement, better liquidity, lower payment costs, and access to money outside traditional banking hours. Waiting for clients to use the technical label before offering a better product would be a mistake.”
Diversifying Digital Assets
The rise of these technologies suggests that institutions will need to continue exploring digital assets initiatives. At the same time, they should keep a core banking tenet in mind as they pursue these strategies: diversification.
“Banks should not bet on whether stablecoins or tokenized deposits become the winner,” Wester said. “The market is not going to one or the other, and banks need to understand how these capabilities are being embedded into payment infrastructure, treasury platforms, vendor products, and financial networks from multiple directions at once.”
“The interoperability question is still the key issue,” he said. “What comes next is tokenized deposits working with stablecoins, other forms of tokenized value, and existing settlement systems.”
