America’s largest banks, including JPMorgan, Citi and Bank of America, plan to build a shared, tokenized deposit network by the first half of 2027 to protect their deposits from the threat of stablecoins, the Wall Street Journal reported.
The system will be managed by The Clearing House, the payments company jointly owned by the banks. Some banks call the network “the bridge,” others call it “the chain,” according to the WSJ.
Tokenized deposits are blockchain representations of customers’ money held at a bank. The planned system will convert these deposits into a digital token that can be quickly transferred on a blockchain.
Stablecoins are dollar-pegged digital assets issued by crypto companies that live outside the traditional banking system. The Clarity Act legislation currently being passed by Congress could allow them to pay out returns to holders, potentially making bank deposits less attractive as the tokens also offer faster, cheaper payment options via a blockchain.
If customers adopt stablecoins on a large scale, banks may experience a deposit flight to crypto wallets, and banks will rely on deposits to provide credit in the economy. The tokenized deposit network is designed to ensure that deposits remain within the banking system while gaining crypto-like capabilities.
The WSJ report states that the Clearing House expects major multinationals to embrace the tokenized deposit network as a gateway to programmable treasury options, real-time liquidity management and cross-border payments.
“This is a big step for the banks,” CEO David Watson told the newspaper, describing a “radically different” future around onchain payments.