Wall Street banks trial tokenized deposits for cross-border cash

On Sept. 5 DBS and Citi’s New York office completed a dollar payment from Singapore to the United States in minutes using tokenized deposits on SWIFT’s digital ledger, the banks said. The firms did not disclose the payment amount or whether the service is broadly available to customers.

Tokenized deposits are digital records that represent a claim on funds held at a bank. The bank remains the legal holder of the deposit, while the token records the obligation in a format compatible with tokenized payment networks. That lets payments move and settle on newer ledgers while keeping the existing bank account relationship.

For corporate treasurers, faster settlement can mean a payment clears in minutes instead of waiting days for accounts to be debited and credited across jurisdictions. Faster settlement can reduce the need for companies to move cash ahead of time or hold extra balances in multiple places. As an example, moving $10 million two days earlier at a 5% annual borrowing cost would add roughly $2,740 in financing expense for those two days, before accounting for any interest earned on the account.

Banks are developing tokenized deposits at the same time as a separate stablecoin effort. On Sept. 1, 21 financial institutions announced plans to form a company that aims to issue a dollar stablecoin in the first half of 2027, with the euro and other G7 currencies to follow later. Banks have said they expect some clients and counterparties to prefer account-based tokens while others use reserve-backed stablecoins.

There are legal and operational differences between bank-backed tokens and reserve-backed stablecoins. Tokenized deposits remain a bank liability governed by the account terms and any applicable deposit insurance rules. Reserve-backed stablecoins are issued by entities that hold backing assets intended to support redemption, and token holders’ claims depend on the issuer’s terms and the mechanics of the token network. Central bank money is used by banks to settle interbank obligations, whereas stablecoins typically trade between holders on private networks and can trade at market prices that diverge from their intended face value.

Operational challenges persist. Some existing systems already offer round-the-clock settlement for certain currencies. Cross-border payments still require conversion and clearing on the receiving end; a dollar arriving on a weekend is only immediately useful if the recipient can convert or spend it when local services are open. If a recipient’s bank does not accept a sender’s token, intermediaries or extra accounts may be needed to complete the transfer.

Netting arrangements, which offset mutual obligations so only the net amount is transferred, can reduce how much cash banks and firms must hold. Instant gross settlement can increase short-term liquidity needs compared with systems that permit netting. Businesses assessing new services must consider transaction speed alongside the total cost of holding and moving cash across accounts and systems.

Citi is participating in both the tokenized-deposit trial and the group planning a bank-issued stablecoin. Firms developing these services say wider adoption will require more payment routes, reliable on-ramps and off-ramps, practical currency conversion at destination banks and clear legal protections for customers. The September trial provides a concrete example of the technology in use, but banks have yet to make it a broadly available product.