JPMorgan, Bank of America, Citi to start blockchain offensive with shared tokenized network
American’s biggest banks plan to introduce a shared tokenized network next year to tackle the potential threat of stablecoins eating into their deposits.
What to know:
- Major U.S. banks, including JPMorgan, Citi and Bank of America, plan to establish a shared tokenized deposit network by mid-2027, operated by the Clearing House, according to the Wall Street Journal.
- The banks plan to convert traditional bank deposits into blockchain-based tokens that can move quickly around the clock, while keeping funds inside the regulated banking system.
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.
