Banks offer tokenized deposits that mimic stablecoins

Major banks are rolling out tokenized deposit products that provide programmable, always-on settlement while keeping the underlying cash on the issuing bank’s balance sheet and eligible for deposit insurance. The products target corporate and institutional clients that want fast, onchain-like dollar movement without moving funds off bank rails.

JPMorgan already operates JPM Coin as a deposit token. Wells Fargo announced plans in early August to introduce tokenized deposits for corporate and commercial clients this fall, beginning with USD-to-GBP transactions and expanding further in 2027. Regulators including the Dallas Fed and the FDIC have said a deposit recorded as a token can remain a commercial-bank deposit on the issuing bank’s balance sheet and fit inside existing supervisory frameworks.

Tokenized deposits keep client cash on the bank’s balance sheet. The bank earns returns by lending or deploying those funds, and holders rely on the bank’s credit standing, supervision and any applicable deposit insurance. In a reserve-backed stablecoin, cash moves into the stablecoin issuer’s reserves and the issuer earns the yield; holders face operational and reserve risks and do not have an automatic pass-through insurance claim. An overcollateralized synthetic dollar is backed by separate collateral and custody arrangements; holder protection depends on the size of the collateral, custody structure and liquidation rules. U.S. legislation under consideration would prevent stablecoin issuers from passing reserve yield through to holders.

Artem Tolkachev, chief RWA officer at Falcon Finance, argued the key issue is where the funds sit rather than the technology. He observed, “A stablecoin competes with the deposit. A tokenized deposit is the deposit, just programmable.” He added that the three instruments look the same to a holder but carry different risk owners depending on who controls the cash.

Industry estimates cited by observers indicate a 1% to 3% shift out of U.S. commercial-bank deposits would move roughly $195 billion to $586 billion off bank balance sheets, measured against a roughly $19.5 trillion deposit base. The FDIC’s April proposal noted that deposits held as stablecoin reserves would be insured to the stablecoin issuer as a corporate deposit, leaving individual stablecoin holders without a direct pass-through insurance claim. Both the Federal Reserve and the Bank for International Settlements have identified a transmission channel linking deposit migration to higher bank funding costs and potential loan repricing.

Banks present tokenized deposits as a way to match stablecoin functionality while retaining deposit funding. In one scenario, large banks develop interoperable tokenized-deposit networks that keep corporate treasury balances inside bank systems and add round-the-clock programmable settlement. In an alternate scenario, stablecoins attract capital faster than tokenized-deposit offerings can retain it, which would increase replacement funding costs, compress net interest margins and affect lending economics.

Tolkachev expects corporate treasurers to use both types of instruments depending on the task: stablecoins for rapid cross-border or onchain settlement, and bank tokens when insurance, a lending relationship and regulatory oversight matter. He advised treasurers to review collateral, reserve arrangements and governance before relying on stablecoin yields, and warned, “This is a fight over the cheapest liability in the system, and the cost of credit is downstream of who wins it.”