Banks Embrace Tokenized Deposits as Stablecoin Alternative

Stablecoins are crypto assets designed to hold a fixed value, often against the dollar, but their ability to function as money depends on reliable redemption and interoperability. Unlike bank deposits, they lack a mechanism guaranteeing conversion at par into central bank money, while transfers between tokens may require secondary-market trades that introduce costs or depegging risk. Tokenized deposits remain supervised, account-based bank liabilities and can settle between institutions through central bank accounts, helping preserve the singleness of money.

Bank for International Settlements General Manager Pablo Hernández de Cos told the Federal Reserve Bank of Kansas City’s Jackson Hole Economic Policy Symposium on Aug. 28, 2026, that stablecoins were not yet credible for payments at scale. He said tokenized deposits should handle most day-to-day payments, with stablecoins serving specialized uses. De Cos also warned that stablecoins could fragment payment systems, complicate anti-money-laundering controls and encourage digital dollarization, while acknowledging that tokenized deposits still face interoperability, governance, legal and settlement hurdles before they can scale.

Tokenized deposits are commercial bank deposits represented on blockchain-based systems. They remain on the issuing bank’s balance sheet and within existing regulatory frameworks, but can move nearly instantly. The concern is not necessarily that money leaves the banking system, but that deposits become less sticky and more rate-sensitive. Programmable features and agentic AI could automatically shift cash toward higher yields, shortening deposit lives and weakening banks’ ability to fund long-term loans with relatively stable, low-cost liabilities.

In an analysis published Aug. 25, 2026, Dallas Fed economists Rosie Levy and Srini Ramaswamy estimated that a 10% reduction in deposits’ weighted average life would cut banks’ maturity-transformation capacity by about $580 billion in 10-year equivalents. A 10% increase in deposit-rate sensitivity could reduce duration-risk capacity by $700 billion, assuming a four-year deposit life. The scenarios use Federal Reserve H.8 data as of July 15 and are estimates, not evidence that $700 billion of lending has already disappeared.

Tokenized deposits represent commercial bank money on distributed ledgers, allowing institutions to pursue faster payments, settlement and other on-chain financial services. Their adoption is pushing traditional banks deeper into blockchain infrastructure while raising a central operational challenge: systems designed around banking hours must evolve to monitor liquidity, cybersecurity, compliance and transactions continuously as networks remain active around the clock.

Banks are accelerating preparations, with the multi-bank Cari Network expected to begin operations in the fourth quarter of 2026. No investment amount has been disclosed. Before launch, participating institutions and regulators will need real-time surveillance, incident-response procedures and coordination across organizations, as the always-on nature of distributed ledgers could amplify operational failures even as tokenized deposits improve settlement speed and efficiency.

Tokenized deposits are blockchain-based representations of commercial bank money that remain liabilities of the issuing lender, unlike stablecoins commonly issued outside the banking system. They promise round-the-clock, near-instant and programmable settlement while preserving established bank compliance and balance-sheet frameworks. For large banks, the technology is both defensive and offensive: it can keep corporate cash and payment flows inside regulated institutions, modernize legacy treasury services and create fee-generating products as financial activity migrates onto distributed ledgers.

Momentum accelerated in the second quarter of 2025. On June 24, J.P. Morgan said Kinexys was piloting JPMD, a permissioned U.S. dollar deposit token, on Coinbase’s Base network for near-instant, 24/7 institutional settlement. J.P. Morgan Payments generated $4.7 billion of quarterly revenue, up 4% year on year. On July 15, Citigroup CEO Jane Fraser said the bank was considering a Citi stablecoin while remaining very active in tokenized deposits. Citigroup reported $21.7 billion in second-quarter revenue and $4.0 billion in net income.

Tokenized deposits represent commercial bank deposits as blockchain tokens and remain liabilities of the bank, unlike stablecoins backed by independent issuers. Anchorage Digital, the first federally chartered crypto bank in the United States, is entering the market with technology that allows traditional banks to retain their existing accounting and compliance frameworks while offering instant, programmable onchain fund transfers.

Anchorage Digital announced its Tokenized Deposits infrastructure on June 22, 2026. The platform runs alongside banks’ core systems and reconciles onchain BDA balances with deposit DDAs, supporting real-time payments and settlement 24 hours a day, 365 days a year. The company said deployment could take as little as a few weeks and that customers’ personal data would remain within their banks. It did not disclose the investment amount, initial banking partners or transaction volumes.