America’s biggest 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 posed by stablecoins, the Wall Street Journal reported.
The system will be operated by The Clearing House, the payments company collectively owned by the banks. Some banks are calling the network “the bridge,” others call it “the chain,” the WSJ said.
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 transferred swiftly 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 advancing through Congress could allow them to pay returns to holders, potentially making bank deposits less attractive because the tokens also offer faster, cheaper payment capabilities over a blockchain.
If customers adopt stablecoins at scale, banks could face a deposit flight to crypto wallets, and deposits are what banks rely on to extend credit in the economy. The tokenized deposit network is designed to ensure deposits remain within the banking system while giving them crypto-like capabilities.
The WSJ report said the Clearing House expects large 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 move for the banks,” CEO David Watson told the newspaper, describing a “radically different” future around onchain payments.