TOKENIZED DEPOSITS
A Comprehensive Technical Report
Architecture, Regulation, Use Cases & Market Developments
Prepared: February 2026
1. Executive Summary
Tokenized deposits are digital representations of traditional bank deposits issued on distributed ledger technology (DLT). Unlike stablecoins โ which are liabilities of non-bank issuers โ tokenized deposits remain within the regulated banking perimeter, carry the full legal protections of conventional deposits, and benefit from existing deposit insurance schemes. They combine the trust and regulatory safeguards of commercial bank money with the programmability and atomic settlement capabilities of blockchain infrastructure.
In 2024โ2025, tokenized deposits moved decisively from conceptual pilots to live deployments. Major institutions โ including JPMorgan, HSBC, and Ant International โ launched real-world initiatives. Regulatory bodies in the United States, United Kingdom, European Union, and Hong Kong began issuing frameworks and guidance that distinguish tokenized deposits from other digital assets, reducing the compliance uncertainty that had previously slowed institutional adoption. The U.S. GENIUS Act (July 2025) established a federal framework for digital cash instruments, while the FDIC signaled dedicated guidance specifically for tokenized deposits.
The World Economic Forum estimates that broader tokenization could save the financial industry USD 15โ20 billion annually in operational costs and free over USD 100 billion per year through more efficient collateral management. Tokenized deposits are positioned as a core enabler of this shift โ providing the on-chain cash leg required for atomic settlement of tokenized securities, bonds, and other assets.
This report examines the technical architecture, regulatory landscape, key institutional initiatives, risk considerations, and future outlook for tokenized deposits as of early 2026.
2. Introduction and Background
2.1 What Are Tokenized Deposits?
A tokenized deposit is a digital token issued by a regulated financial institution (typically a commercial bank) that represents a claim on a fiat-currency deposit held at that institution. The underlying deposit does not change โ it remains a liability of the bank, covered by deposit insurance and subject to the full regulatory framework governing traditional deposits. What changes is the infrastructure: instead of being tracked in a bank's internal ledger, the deposit claim is represented as a programmable token on a distributed ledger.
This distinction is critical. The three primary forms of digital cash today are: (1) stablecoins โ privately issued, fiat-backed tokens outside the banking perimeter; (2) tokenized deposits โ commercial bank deposits issued on DLT; and (3) central bank digital currencies (CBDCs) โ digital money issued directly by central banks. The Bank for International Settlements (BIS) highlights the concept of the "singleness of money" as a cornerstone of modern finance โ the principle that different forms of money (public and private) are interchangeable at par. Tokenized deposits preserve this singleness in a way that algorithmically backed or insufficiently regulated stablecoins may not.
2.2 Why Now? The Drive Toward Tokenization
Several converging forces have accelerated interest in tokenized deposits:
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Legacy payment infrastructure operates on batch processing with cut-off times, multi-day settlement cycles, and fragmented intermediary chains โ inefficiencies that impose real costs on financial institutions and their clients.
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The growth of tokenized real-world assets (RWAs) โ bonds, equities, commodities โ creates demand for an equivalent on-chain cash instrument capable of delivering atomic settlement (simultaneous, instantaneous exchange of asset and payment).
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Advances in DLT infrastructure, smart contract platforms, and interoperability protocols have made production-grade deployment more viable.
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Regulatory maturation in key jurisdictions (U.S., UK, EU, Hong Kong, Singapore) has reduced legal uncertainty, enabling banks to commit resources to tokenized deposit programs.
3. Technical Overview
3.1 Architecture and Mechanics
Tokenized deposits are created through a mint-and-burn model. When a corporate or institutional client wishes to convert a balance into a tokenized deposit, the bank debits the client's account and mints an equivalent quantity of tokens on the designated DLT. When the client redeems, tokens are burned and the fiat balance is restored. Throughout this cycle, the bank's balance sheet is unchanged: it holds the same deposit liability; only the recording mechanism differs.
Smart contracts govern the rules of issuance, transfer, redemption, and any conditional payment logic. For example, a smart contract can be programmed to release payment to a counterparty only upon verified delivery of a digital asset โ enabling Delivery-versus-Payment (DvP) without a central clearing counterparty. This atomic settlement eliminates the principal risk present in traditional settlement cycles.
3.2 DLT Infrastructure
Most tokenized deposit initiatives today operate on permissioned or semi-permissioned blockchain infrastructure. Key considerations include:
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Private/permissioned ledgers (e.g., Hyperledger Fabric, R3 Corda): Offer greater control, privacy, and compliance alignment. Used by most bank-to-bank wholesale initiatives.
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Public permissioned blockchains (e.g., Ethereum with access controls): Offer broader interoperability. JPMorgan's Deposit Token deployment on Base (a public Ethereum Layer 2) in 2025 is a landmark example of a regulated token on a public chain.
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Token standards: Most tokenized assets use EVM-compatible standards. Ethereum alone hosts over 60% of tokenized real-world assets (Cointelegraph, June 2025). ERC-20 is the most prevalent standard, with extensions for compliance controls (e.g., ERC-3643 for regulated securities).
3.3 Programmability and Smart Contract Use Cases
The programmability of tokenized deposits enables financial logic that is impossible with traditional payment rails:
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Atomic DvP and PvP Settlement: Simultaneous exchange of tokenized assets and cash, eliminating settlement risk.
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Conditional payments: Funds released automatically upon verification of predefined conditions (e.g., proof of delivery in trade finance, completion of regulatory checks).
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24/7 operation: Unlike traditional systems with daily cut-off windows, tokenized deposit transfers can operate continuously.
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Machine-to-machine micropayments: Emerging applications combine programmable tokens with AI agents for complex use cases such as automated trade finance invoicing.
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Multi-rail compatibility: The Faster Payments Council notes that tokenized deposit transfers can be programmed to emulate ACH, RTP, wire, or any other payment scheme, lowering adoption costs for financial institutions.
4. Data, Evidence and Market Analysis
4.1 Key Quantitative Benchmarks
Metric Value / Finding
Projected annual cost savings (financial industry) USD 15โ20 billion (WEF, May 2025)
Capital freed via efficient collateral management Over USD 100 billion per year (WEF, May 2025)
Ethereum RWA market share 60%+ of all tokenized real-world assets (Cointelegraph, Jun 2025)
SNB pilot transaction CHF 64 million in 7-day digital SNB bills on SIX Digital Exchange (Jun 2024)
UK GBTD pilot duration Running to mid-2026 across 3 live use cases โโโโโโโโโโโโโโโโโ- โโโโโโโโโโโโโโโโโโโโโโโโโโ
4.2 Regulatory Environment
The regulatory landscape for tokenized deposits shifted substantially in 2024โ2025:
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United States (GENIUS Act, July 2025): Established a long-awaited federal framework for digital cash instruments. Gave banks explicit authority to issue fiat-backed tokens and closed a gap previously addressed only by patchy state-level rules. The FDIC has signaled dedicated guidance for tokenized deposits is forthcoming. The Conference of State Bank Supervisors (CSBS) has formally requested joint federal-state guidance covering deposit insurance treatment, KYC/AML obligations, liquidity risk, and DLT governance standards.
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United Kingdom: The Bank of England and UK Finance's GBTD pilot have positioned the UK as a leader in regulated tokenized deposit deployment. Regulators have described tokenized deposits as a "third way" โ distinct from stablecoins and CBDCs โ that fits within existing banking regulation.
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European Union: The ECB expressed cautious support in 2025, recognizing tokenized deposits and compliant stablecoins as inevitable parts of the financial system, while flagging the need to prevent monetary fragmentation.
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Hong Kong: The Stablecoin Bill (passed May 2025, effective August 2025) requires licensing, reserve backing, and audits. The HKMA has committed to making tokenized bonds a standard tool for sovereign issuance.
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BIS / Multilateral: Project Agorรก (launched April 2024, findings due end 2025), a public-private partnership involving seven central banks and major private institutions including Visa and Mastercard, is exploring how tokenized commercial bank deposits can integrate with tokenized wholesale central bank money on a unified programmable platform.
5. Case Studies and Institutional Initiatives
Institution Initiative Detail
JPMorgan Deposit Token on Base Deployed a regulated deposit token on a public blockchain (Base, an Ethereum L2) โ a landmark move into public chain infrastructure for institutional finance. Multi-currency versions are planned.
HSBC Cross-border Payments Introduced tokenized deposit capabilities for cross-border corporate payments targeting faster settlement and improved liquidity efficiency.
Ant International Cross-border Commerce Collaborated with banking partners to apply tokenized deposits to cross-border payment flows, addressing demand from global e-commerce platforms.
VersaBank USD Tokenized Deposit Launched testing of a U.S.-dollar tokenized deposit product combining blockchain settlement with insured bank money.
UK Finance (GBTD) Fungible Sterling Deposits Piloting live transactions of fungible tokenized sterling deposits across three use cases: marketplace payments, remortgaging, and digital asset settlement. Running until mid-2026.
Germany CBMT Commercial Bank Money Token Launched a sandbox in 2025 to test tokenized commercial bank money, with major banks and industrial corporations as participants.
Swiss National Bank Digital SNB Bills First central bank to execute a live monetary policy operation on DLT (June 2024). Issued CHF 64 million in 7-day digital bills on SIX Digital Exchange. โโโโโโโ โโโโโโโโโโ โโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโโ-
6. Discussion and Implications
6.1 Benefits
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Settlement efficiency: Atomic DvP eliminates principal risk and shortens settlement from T+2 or longer to instantaneous, reducing counterparty credit exposure across the financial system.
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Cost reduction: Eliminating intermediaries in cross-border payments and reducing reconciliation overhead translates directly to operational savings.
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Programmable finance: Smart contract integration enables sophisticated, automated financial arrangements โ conditional payments, escrow, collateral management โ without manual intervention.
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Regulatory alignment: Because tokenized deposits remain within the banking perimeter, they benefit from existing deposit insurance, capital, and AML/KYC frameworks, creating a clearer compliance path than stablecoins.
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Interoperability with CBDCs: Projects like Agorรก envision a unified platform where tokenized commercial bank deposits settle against tokenized wholesale central bank money โ preserving the two-tier monetary system in a digital form.
6.2 Risks and Challenges
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Interoperability fragmentation: Without common standards, tokenized deposits issued on different platforms may not be directly transferable, creating liquidity silos. The shift from pilots to scale hinges on interoperability across bank networks, payment rails, and jurisdictions.
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24/7 liquidity risk: Always-on redemption capability creates new liquidity management challenges. The CSBS has specifically requested guidance on Liquidity Coverage Ratio treatment and contingency funding plans for tokenized deposits.
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Legal and regulatory gaps: Even with progress in 2025, key questions remain โ particularly around deposit insurance characterization in marketing, AML/KYC obligations in token transfers, and the treatment of non-bank participants in shared ledger networks.
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Technology risk: Smart contract vulnerabilities, oracle failures, and DLT platform outages introduce operational risks not present in traditional systems. Governance of upgrades and incident response procedures require careful design.
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Financial stability: The IMF and BIS have flagged risks of deposit migration to tokenized forms potentially weakening bank funding models if not carefully managed, particularly in a CBDC context.
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Governance and control: Permissioned ledgers concentrate governance with a small number of operators, creating single points of failure or potential conflicts of interest in consortium arrangements.
6.3 Tokenized Deposits vs. Stablecoins: Key Distinctions
A frequently misunderstood point is the relationship between tokenized deposits and stablecoins. The following comparison illustrates the fundamental structural differences:
Feature Tokenized Deposit Stablecoin
Issuer Regulated commercial bank Non-bank private entity (typically)
Deposit insurance Yes (e.g., FDIC in the US) No
Balance sheet Bank liability Issuer liability
Regulatory framework Existing banking regulation New/emerging stablecoin laws
Transferability Generally within bank networks Broadly transferable on open networks
Monetary system role Preserves two-tier banking system Operates outside traditional banking โโโโโโโ- โโโโโโโโโโโโ โโโโโโโโโโโโโ
7. Recommendations and Conclusions
7.1 For Banks and Financial Institutions
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Begin or accelerate tokenized deposit pilots, focusing on high-value B2B use cases (trade finance, securities settlement, cross-border payments) where the efficiency gains are most material and measurable.
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Invest in DLT infrastructure that supports interoperability โ both across internal systems and with industry consortia such as Project Agorรก or the UK's GBTD network.
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Engage actively with regulators on guidance development, particularly on liquidity risk management, AML/KYC workflows for token transfers, and DLT governance standards.
7.2 For Regulators
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Prioritize issuing unified, cross-agency guidance (as requested by the CSBS) to reduce the compliance ambiguity that remains the primary barrier to scaled deployment.
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Clarify deposit insurance treatment, ownership rights, and how existing consumer protection rules apply to tokenized forms โ ensuring that customers are no less protected than in traditional banking.
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Develop interoperability standards in coordination with international counterparts to prevent a fragmented global landscape.
7.3 Conclusions
Tokenized deposits represent a pragmatic, regulated evolution of commercial bank money โ not a replacement for existing financial infrastructure, but an upgrade of its underlying rails. By combining the trust and legal protections of traditional deposits with the programmability and settlement efficiency of distributed ledger technology, they address genuine inefficiencies in payments, cross-border finance, and capital markets settlement.
The period from 2024 to early 2026 has seen the technology move from theoretical to operational, with major institutions deploying live products and regulators across multiple jurisdictions providing or developing explicit frameworks. The pace of adoption will ultimately depend on resolving remaining regulatory ambiguities, building interoperable infrastructure, and managing the liquidity and operational risks unique to always-on programmable money.
Tokenized deposits are not a fringe innovation: they are becoming foundational infrastructure for the next chapter of digital finance.
8. References
[1] PYMNTS.com โ "FDIC Support Clears a Path for Tokenized Deposits to Scale" (December 2025): [https://www.pymnts.com/news/regulation/2025/fdic-support-clears-path-tokenized-deposits-scale]{.underline}
[2] State Street โ "Tokenized cash: A regulatory view of unlocking a digital financial market" (2024): [https://www.statestreet.com/pl/en/insights/digital-digest-december-2024-regulatory-update-tokenization]{.underline}
[3] BIS โ "How deposits can harness tokenisation", Remarks by Andrรฉa M. Maechler (November 2025): [https://www.bis.org/speeches/sp251128.pdf]{.underline}
[4] CSBS โ "Guidance on Tokenized Deposits" comment letter to FDIC/FRB/OCC: [https://www.csbs.org/csbs-tokenized-deposits-comment-letter]{.underline}
[5] FinTech Weekly โ "Stablecoins in 2025: How Regulation, Banks, and Fintechs Turned Digital Money Into a Global Infrastructure" (December 2025): [https://www.fintechweekly.com/magazine/articles/stablecoins-2025-regulation-banks-fintech-digital-money-infrastructure]{.underline}
[6] SettleMint โ "Three Tokenization Forces Defining the Future of Financial Markets": [https://www.settlemint.com/blog/three-tokenization-forces-defining-the-future-of-financial-markets]{.underline}
[7] IMF โ "Central Bank Exploration of Tokenized Reserves", Financial Notes (2025): [https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025011.pdf]{.underline}
[8] CFTC โ "Acting Chairman Pham Announces Launch of Digital Assets Pilot Program for Tokenized Collateral": [https://www.cftc.gov/PressRoom/PressReleases/9146-25]{.underline}
[9] Faster Payments Council โ "Tokenized Deposits and the Potential for Faster Payments" (June 2024): [https://fasterpaymentscouncil.org/blog/13697/Tokenized-Deposits-and-the-Potential-for-Faster-Payments]{.underline}
[10] UK Finance โ "Reflecting on 2025: Tokenised Deposits and the Future of Payments": [https://www.ukfinance.org.uk/news-and-insight/blog/reflecting-2025-tokenised-deposits-and-future-payments]{.underline}
