Major US banks, including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo, have announced a landmark collaboration aimed at moving tokenized versions of customer deposits across a shared blockchain-based network. According to the Wall Street Journal, the initiative is being developed under the umbrella of The Clearing House, with a goal of launching the system by 2027.
Banks plan a joint blockchain payments network
The proposed system will allow participating US banks to transfer tokenized forms of customer deposits on a blockchain network around the clock. The network will be managed by The Clearing House, a payment company jointly owned by member banks. So far, no final decision has been made on which blockchain provider will support the network.
Mini glossary: Tokenized deposits represent digital versions of customers’ actual deposits at a bank on a blockchain. Unlike stablecoins, which are separate digital assets, tokenized deposits are directly backed by funds on the bank’s balance sheet.
David Watson, CEO of The Clearing House, described the initiative as a significant leap for banks, emphasizing that the future of the industry is rapidly evolving with on-chain payments and finance. Reports indicate that some banks internally refer to the project as “the bridge,” while others use the name “the chain.”
David Watson emphasized that the initiative is a major step for banks and that with on-chain payments, the financial sector is heading towards a very different future.
Heightened stablecoin competition pressures banks
This move comes at a time when large banks are increasingly concerned about stablecoins gaining a bigger foothold in payments and corporate finance. According to the report, banks worry that if crypto companies become more popular among retail and institutional clients, some liquidity could flow out of the traditional banking sector.
The ongoing legislative process in Washington involving the CLARITY Act is further intensifying these worries. Banks are uneasy about proposed rules possibly allowing stablecoins to bear interest-like features, while crypto firms see the current draft as a workable compromise. The tokenized deposit model, however, could ensure that funds remain within the regulated banking system.
Corporate giants likely to be early adopters
Initial use of the new network is expected to come mainly from large multinational corporations. These customers may find particular value in the system for cross-border payments and liquidity management.
Shahmir Khaliq, Citigroup’s global head of services, described the new network as a move that will strengthen banks’ positions in capital markets and financing. Mark Monaco, Bank of America’s head of global payment solutions, offered a more cautious assessment: he noted that customer demand for tokenized deposits is not yet strong, but there is some interest and this network will help banks prepare for possible future growth.
JPMorgan is considered to have the most experience in this area. The bank launched JPM Coin for internal corporate payments on its private blockchain and has also introduced a deposit token on Coinbase’s public Base blockchain, accessible exclusively to institutional clients.
