Major US banks, including JPMorgan, Citi, and Bank of America, plan to build tokenized shared deposit networks by the first half of 2027 to protect deposits from threats posed by stablecoins, The Wall Street Journal reported.
The system will be operated by The Clearing House, a payments company jointly owned by banks. According to WSJ, some banks call this network a “bridge,” while others call it a “chain.”
Tokenized deposits are blockchain representations of customer money held in banks. The planned system will convert these deposits into digital tokens that can be quickly transferred on the blockchain.
Stablecoins are digital assets pegged to the dollar that are issued by cryptocurrency companies outside of the traditional banking system. The Transparency Act bill currently moving through Congress could allow tokens to pay out profits to their holders, making bank deposits less attractive, as they also offer faster and cheaper payment capabilities via blockchain.
If customers adopt stablecoins at scale, banks could face a flight of deposits into crypto wallets, which banks rely on to expand credit in the economy. Tokenized deposit networks are designed to ensure that deposits remain within the banking system while providing crypto-like functionality.
According to a WSJ report, the Clearinghouse expects large multinationals to adopt tokenized deposit networks as a gateway to programmable treasury options, real-time liquidity management, and cross-border payments.
“This is a big move for banks,” CEO David Watson told the newspaper, describing a “radically different” future for on-chain payments.
