Since 2022, the idea of bank deposits on blockchains has leapt from theory into reality. In the UK and Asia, pilots are already testing “tokenized deposits,” digital cash issued and backed by real bank accounts, for everyday use. These on-chain bank dollars and pounds promise consumers the speed of crypto payments with the guarantees of bank money.
Over half of Americans use digital wallets more frequently than traditional cards, and tokenized deposits align with this trend. They allow people to transfer their own bank money 24/7 across wallets, peer-to-peer, without waiting for banking hours.
This issue is now the talk of the crypto community, from HSBC’s November launch to S&P’s Tether downgrade.
24/7 Money That Never Sleeps
Tokenized deposits move money instantly, anytime. In a Citigroup–Swift pilot announced this month, U.S. dollars on stablecoins (and, by extension, tokenized dollars) are settled across a hybrid fiat-DLT network in seconds. Banks say this is exactly the appeal.
A report notes that on-chain deposit tokens let clients send payments “within seconds and on a 24/7 basis, instead of days and confined to business hours.” Unlike traditional bank transfers, which can take days and stop on weekends, tokenized deposits on a public blockchain can settle around the clock.
In the UK there is a pilot being run by industry group UK Finance. The pilot is helping banks test person-to-person payments on marketplaces (with better fraud checks) and even programmable payouts like automated invoice payments. All this means consumers could soon buy and send money with the click of a button in an app, anytime, with settlement as instant as a crypto transfer.
The Weapon That Pays You Interest
A key advantage of tokenized deposits is that they live inside the banking system. Each token is literally “a digital representation of a commercial bank deposit.” That means, unlike many crypto coins, they can still earn yield. JPMorgan’s Kinexys team calls deposit tokens “yield-bearing,” noting they will eventually give interest like normal accounts. By contrast, new rules (the U.S. “GENIUS Act”) effectively limit stablecoin issuers from paying any interest on their tokens.
In practice, this means a tokenized deposit could double as a high-tech savings account: users keep the money on-chain but still draw the bank’s regular deposit rate. The bank backing the token pledges that every unit is held in a deposit account eligible for FDIC insurance, so consumers get both 24/7 digital access and the familiar protections of insured bank money.
FDIC-Insured, On-Chain, and Regulated to Death (in a good way)
Tokenized deposits are designed to feel like normal cash. By construction, they are 1:1 backed by real currency in a bank. “Unlike stablecoins…which are synthetic and lack meaningful consumer protections, tokenized deposits are on-chain representations of real dollars issued by a bank regulated under U.S. law…,” per a report. In other words, each token is just as safe as the deposit in your checking account, complete with regulation and oversight. This contrast is attracting major banks.
Global co-head of J.P. Morgan’s blockchain division Kinexys, Naveen Mallela, says deposit tokens are “a compelling alternative” to stablecoins for institutions, because they stay within existing rules and controls (including reserve requirements) that apply to normal bank deposits. The Bank of England similarly sees tokenized deposits as a safer path; BOE Governor Andrew Bailey has warned that private stablecoins “take money out of the banking system” and prefers banks to innovate with their own regulated tokens. Indeed, UK pilots explicitly highlight that tokenized deposits “retain the trust and regulatory protections of conventional deposits, while offering…” faster settlement and programmability.
Major banks like JPMorgan are rolling out deposit tokens for fast on-chain payments. UK pilots will even let people pay or receive money on marketplaces with bank-backed tokens. In practice, this might look like a mobile wallet app (issued by your bank or a fintech) holding your tokenized dollars. You could send a token deposit to a friend as easily as sending an email, or pay a merchant instantly with a smart contract.
Some pilots even tie these digital deposits to real activities. For example, UK banks are testing tokenized deposits for home remortgaging to speed up conveyancing and cut fraud. Other experiments connect tokenized customer money with digital assets and crypto settlements, hinting that tomorrow’s consumers could swap tokenized cash for investments or international transfers in one seamless flow.
Stablecoins vs. The Adults in the Room
Both tools share blockchain rails, but tokenized deposits edge out stablecoins on trust and compliance. Stablecoins like USDT and USDC have grown enormously — nearly $300 billion in market cap at the time of writing, with forecasts of $1.9 trillion in issuance by 2030. They offer speed and 24/7 access and sometimes yield via private lending. But they carry counterparty risk: they are debts of crypto firms, not bank liabilities, and until recently were lightly regulated. And, in the case of Tether there are other issues too as per a report this week from Standard & Poor’s. These issues include limited transparency on reserve management and risk appetite, lack of a robust regulatory framework, and more.
By contrast, a tokenized deposit is the bank’s liability, subject to banking rules. U.S. regulators now require stablecoins to hold 100% reserves and ban them from misleading claims, but they still do not guarantee holders in the same way banks do. In short, tokenized deposits blend the best of both worlds. The instant, programmable nature of crypto money, with the insurance and oversight of bank accounts.
The Rollouts Happening Right Now
This isn’t just theory. This month, JPMorgan began rolling out JPM Coin on Coinbase’s Base blockchain, after trials with partners like Mastercard and Coinbase. Citigroup has joined efforts to settle dollars to crypto, and in Europe, nine big banks (ING, UniCredit, DekaBank, etc.) have formed a group to launch a MiCA-compliant euro stablecoin (which could intertwine with deposit tokens).
Meanwhile, a U.S. fintech (USBC) announced that by 2026, retail customers globally can open U.S. bank deposit accounts that live on-chain (via the bank charter of Vast Bank and Uphold’s wallet), highlighting that even everyday accounts may soon be tokenized.
Closer to home, the UK pilot of tokenized sterling deposits involves household-name banks (Barclays, HSBC, Lloyds, NatWest, Nationwide, Santander) and will run real consumer-facing transactions until mid-2026. The Bank of England has explicitly said such experiments can run under today’s rules.
The Tech and Rules Are Already Here
Behind the scenes, tokenized deposits rely on mature blockchain networks and digital identity systems. JPMorgan’s Kinexys platform (formerly JPM Coin) already processes billions of dollars a day internally on a permissioned network. Now, banks are expanding those tokens onto public Ethereum roll-ups and linking to other ledgers for interoperability.
Regulators are catching up. In the U.S., the GENIUS Act (July 2025) created a federal framework for dollar stablecoins, prompting banks to jump in safely. Europe’s Markets in Crypto-Assets (MiCA) regime similarly sets standards for euro tokens. Importantly, tokenized deposits fit neatly under existing bank rules and deposit insurance. Analysts note that integrating DLT with regulated banking is “a bridge” to full digital finance.
As UK Finance executive, Jana Mackintosh explainted that tokenization lets banks innovate “while keeping payments inside the regulated banking system.”
Yes, There Are Still Some Problems
This week Gilbert Verdian, Founder of Quant Network, shared his thoughts on tokenized deposits. In the story Gilbert highlighted several challenges that remain before this asset class can be rolled out. These include:
“Banks and wallets lack a common language for exchanging payment information.”
“The industry has failed to establish uniform approaches to administrative controls.”
“Banks want the compliance controls and regulatory clarity of traditional deposits, but public blockchain architecture demands different approaches to permissioning and identity management.”
The Verdict: Stablecoins Are Officially Yesterday’s News
For consumers, the promise of tokenized deposits is concrete. Instant, cross-border payments and more flexible savings, delivered through familiar banking channels. If open banking wallets and fintech apps embrace them, users could top up their phone wallets with “token dollars” just as easily as buying airtime today. They would earn interest like in a normal account but use the funds on-chain to pay for goods, send to friends, or seamlessly exchange for investments.
This fusion of on-demand digital cash with traditional safety nets may finally unlock the full convenience of cryptocurrencies for everyday people — all under the guardrails of the banking system.
#Crypto #TokenizedDeposits #Stablecoins #Banking #Yield #Tokenization
Author: Ayanfe Fakunle
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
Tether (USDT) Stablecoin Stability Assessment At 5 (Weak) | Disruption Banking
The Rise of Tokenised Deposits | Disruption Banking
How BlackRock, JPMorgan & HSBC quietly murdered boring stablecoins | Disruption Banking
Quant’s Verdian Champions Programmable Money at IFGS2025 | Disruption Banking
