Whatever happened to tokenised deposits?
The main obstacle to tokenised deposits scaling is lack of interoperability between the tokenised deposits of individual banks.
Banks are also coming to appreciate the costs and complexities of building the internal systems and procedures to support tokenised deposits.
In the long run, tokenised deposits will outperform Stablelecoins in terms of both stocks and flows.
Tokenised deposits are also better placed than Stablecoins to deliver the most valuable promise of tokenised money: programmability.
Interoperability between banks, not the reluctance of banks to issue, topped the list of obstacles blocking tokenised deposits from reaching scale at the Future of Finance Digital Money event this summer. Just one of 74 registrants polled ahead of the panel blamed banks for timidity. Nearly half of the 74 registrants polled ahead of the panel blamed the absence of tokenised deposits on the fact they are currently useable only within a single bank. A quarter blamed legacy bank systems as incapable of supporting tokenised deposits. Only a minority considered Stablecoins an adequate substitute (see Chart 1). Even fewer cited a lack of viable use cases or inadequate infrastructure. Two write-in answers named slower use-case delivery against Stablecoins and the burden of regulation from launch.
Chart 1
Building a tokenised deposit from scratch is not easy. It resembles a transformation of a core banking system. It cannot escape existing financial crime compliance obligations. The novelty of the instruments requires new or at least revised cybersecurity practices and transaction monitoring capabilities. Since each bank has to build these capabilities independently, no shortcuts to scaling tokenised deposits are available. The tendency of banks to form consortiums to develop tokenised deposits, though it springs from a recognition that successful tokenised deposits must enable transfers of value between banks as well as between customers of a single bank, cannot circumvent the responsibility of individual banks to build the systems and procedures required. Consortia, which necessitate aligning banks and central banks across time zones and legal jurisdictions, might even make the task harder.
That said, banks are far from uninterested in tokenised deposits. The Bank for International Settlements (BIS) survey of central bank digital currencies (CBDCs), conducted across 93 jurisdictions and published in August 2025, found 30 per cent of jurisdictions had commercial banks exploring tokenised deposits, but fewer than 20 per cent had actually issued one. This gap between exploration and issuance is governed chiefly by concern about the costs of building a tokenised deposit infrastructure rather than bank reluctance or indifference.
For now, the J.P. Morgan tokenised deposit (JPM Coin or JPMD) remains the flagship. Held by users in a Blockchain Deposit Account (BDA), JPMD has processed a cumulative total of more than US$3 trillion in transactions on a private blockchain network that operates between clients of J.P Morgan. It offers foreign-exchange conversions in eight currencies. In November 2025, JPMD also became the first tokenised deposit to go live on a public blockchain when it became available on the Base blockchain operated by Coinbase.
Clients of J.P. Morgan can now send and receive money in tokenised form on Base. The bank has since made JPMD available on the private-public Canton Network blockchain as well. Being on third party blockchains is proving useful for J.P. Morgan clients that want to buy and sell digital assets without relying on Stablecoins alone.
After all, tokenised deposits bring financial markets something valuable that Stablecoins cannot deliver: structural proximity to central bank money as the ultimate settlement asset. Tokenised deposits are the tokenised equivalent of the commercial bank deposits that constitute commercial banks money. A tokenised deposit changes form, not substance: it remains a bank deposit subject to existing deposit, capital and resolution rules. Stablecoins, by contrast, are backed by reserves whose quality varies enormously.
Some Stablecoin issuers restrict themselves to high-quality liquid assets such as Treasury bills, while others take a much wider range of risks. A tokenised deposit, by contrast, carries the credit risk of a single regulated bank whose capital and liquidity are already supervised by a central bank. That matters most to the corporate clients that move the largest sums and hold the biggest balances.
Tokenised deposits are already meeting higher standards. One bank's tokenised deposit is backed by assets equal to 150 per cent of the value in issue, with the additional 50 per cent on top of the underlying deposits funded by a combination of shareholder’s funds and bail-in bonds. This provides a generous buffer against the risks inherent on the asset side of the bank balance sheet: the loan book of the bank. That level of over-collateralisation, inherited from decades of bank capital regulation, is exactly what most Stablecoin structures lack.
The challenge for tokenised deposits is how to make them exchangeable between banks. JPMD is working bilaterally with a Singapore-based bank on an interoperability framework to enable clients to hold and settle using tokenised deposits of either bank. The Great British Tokenised Deposit (GBTD) initiative is addressing the challenge on a wider scale. A multi-bank tokenised deposit initiative now at the pilot stage, GBTD is steered by the City of London trade association UK Finance, working in partnership with Barclays, HSBC, Lloyds Banking Group, Monzo, Nationwide, NatWest and Santander. The project, which began with the Regulated Liability Network (RLN) blueprint for a payments platform shared between banks - RLN was also led, from April 2024, by UK Finance – aims specifically to move beyond JPMD-style intra-bank tokenised deposits to enable value (as opposed to deposits) to be moved (or settled) between banks. This work on interoperability is crucial, since the utility of any form of money is governed by network effects, not branding.
Lack of interoperability is a substantial problem for tokenised deposits. Like deposits, they belong to and sit on the balance sheet of the bank that issues them, so they cannot be transferred from one bank to another, GBTD solves the problem by the issuing bank “burning” tokenised deposits on its blockchain ledger and the receiving bank “minting” tokenised deposits on its blockchain ledger in much the same way that banks have long transferred value by updating their ledgers. But barriers to updating bank records in this way - data standards, financial crime checks, legal liability – remain substantial enough to condemn tokenised deposits to either isolation in a bank silo or at best bi-lateral movements of value between two banks only. This means network effects cannot be generated, and so scale is limited.
Financial crime seems most problematic. Banks have long refused to trust identity verification data supplied by third parties when it comes to client onboarding and transaction monitoring, and Anti Money Laundering (AML), Countering the Financing of Terrorism (CFT) and detecting sanctions evaders is the one part of the existing structure of regulation that all parts of the tokenisation industry have learned to live with, via the Travel Rule. One possible solution is a system of bank-issued verifiable credentials, by which banks would agree to rely on identities verified by another bank, though the entire history of efforts to standardise customer verification procedures between banks argues against it.
Beyond regulatory considerations, what interoperability requires is a coordination layer in which the separate systems of banks can settle transactions (i.e., agree what has happened in the way that traditional inter-bank reconciliation processes do) without the need to exchange data in a standardised format between separate systems or forcing banks to totally reinvent their payments systems. One bank is now piloting a scheme in which the claims of the payer and the payee are locked and earmarked within the tokenised deposit itself, allowing value to be released automatically once both sides confirm the transaction is complete. If this capability proves workable, it can support retail as well as wholesale transactions, undercutting the widespread notion that tokenised deposits can work at the wholesale level only.
More substantial progress is being made on the use of tokenised deposits to settle cross-border and cross-currency transactions: a form of interoperability at the international level. Multiple banks are actively engaged in Project Agorá, a public-private BIS Innovation Hub initiative to widen the use of tokenised deposits. Five central banks (Bank of England, Bank of France (for the Eurosystem), Bank of Japan, Bank of Korea, Swiss National Bank) are testing with 22 banks drawn from eight jurisdictions the usefulness of a shared, multi-currency, programmable settlement platform for wholesale cross-border payments. Agorá is progressing steadily. It has moved from the experimental stage to pilot testing. However, a decision to move to full production has yet to be taken.
All of that said, some believe fragmentation of tokenised deposits – not just across blockchains but in terms of the standards to which they adhere – helps mitigate risk by creating closed loops within banks rather than allowing transfers between blockchain networks. The difficulty is that fragmentation creates costs and, if tokenised deposits cannot overcome the costs of the status quo, they will never achieve scale. The designers of JPMD, for example, were careful to build the tokenised deposit on existing token standards, including ERC-20 and ERC-4337, adding only the narrow functions needed for administrative controls and cybersecurity.
When it comes to cross-border payments, the persistence of fragmentation would have even worse effects. It would recreate the costs of international payments messaging networks built decades ago, without retiring any of the legacy infrastructure that tokenised deposits have the power to supplant. Whether correspondent banks can survive projects such as Agorá, once they achieve maturity, is an open question. It seems reasonable to expect the number of intermediary banks a payment passes through to fall as tokenised deposit networks connect banks to each other directly, even across borders. Yet access to central bank money at the national level will likely remain the preserve of correspondent banks.
Making money programmable is the other aspect of tokenised deposits that needs to be progressed. Programmability is usually assumed rather figured out. Yet it revolutionises the idea of money. Traditionally, the sending and receipt of money marks the conclusion of a lengthy, sequential set of data exchanges in which the payer and the payee agree what has happened. Programmable money builds those processes not the money itself by embedding instructions such as “Pay when goods are delivered” or “Split this payment across multiple accounts” or “Pay this sum when conditions are met.” So programmable money is relevant to retail as well as wholesale customers of banks. The panel members knew this, rejecting the idea that programmability be reserved for corporate customers only. However, the choice of which use case to prioritise – say, trade finance or corporate treasury, as opposed to retail deliveries – might still favour corporates over retail. Either way, programmability will not be judged by its ability to compete on speed against existing payment schemes. It will be judged by its ability to link settlement conditionally to a specific invoice, security transaction or asset transfer, so money moves automatically once the underlying conditions are satisfied. This is the capability existing payment rails do not offer.
Perhaps the real competitor to tokenised deposits is Stablecoins. Though Stablecoin growth has been curiously muted of late, despite the passage of the GENIUS Act in the United State in July 2025, the fact that established payments companies are developing infrastructure capable of supporting Stablecoins suggest the market is maturing rather than stalling. This does not mean tokenised deposits are failing to exploit the opportunity. Rather, they are proceeding at the pace such a sweeping innovation demands. Stablecoin issuers can move faster but, when it comes to scale, tokenised money is a race that the tortoises are probably better placed to win.
