Banks have been issuing tokenized money for the better part of a decade, but those products were primarily tokenized deposits on private networks. Regulation has since cleared a path for tokenized money on public networks, giving financial institutions more options to serve the growing institutional demand. Our new whitepaper works through three product families of tokenized money with the primary use case, the deposit trade-off, and the liquidity ratio impact. Read the whitepaper.
In most cases, tokenized money at banks means private-ledger products that never left the bank’s network. JPMorgan, Citibank, HSBC, and others tokenized deposit liabilities on infrastructure they controlled. Each served wholesale payments between vetted institutional clients and stayed inside the perimeter. The customer relationship was preserved, and the regulatory uncertainty was small.
Outside the bank perimeter, stablecoins emerged as an alternative form of tokenized money. They moved more than $300 billion in payment volume over the past year. Visa settles over $7 billion in stablecoin card volume annually, across multiple blockchains and stablecoins. Trade.XYZ, an institutional perpetual venue, has cleared $100 billion on the S&P 500 perpetual since March 2026, all settled in stablecoins.
The GENIUS Act and Basel SCO60 now give banks a clear rulebook for issuing tokenized money, including stablecoins, on public networks. Banks can serve this emerging demand with tokenized deposits, first-party stablecoins, or third-party stablecoins. Each carries a different trade-off across the deposit franchise, interoperability, and liquidity ratios. Most banks will end up needing more than one.
Three families of tokenized money
A bank has three structural options for serving tokenized money flows. Each carries a different balance-sheet cost and reaches a different range of venues.
- Tokenized deposits. A tokenized deposit is a regular bank deposit wrapped in a token. The customer holds the token in a wallet, but the money stays on the bank’s books, so the deposit franchise stays intact. The trade-off is reach, since the token only moves between counterparties the bank has approved. JPMD on Base is the live example. It pays interest because it is still a deposit underneath the wrapper.
- First-party stablecoins. A first-party stablecoin is one the bank issues itself, backed dollar-for-dollar by a segregated pool of reserves. The customer’s claim is no longer a deposit at the bank but a redemption contract against that pool. That shifts the liability from the cheapest Basel category to the most expensive. In return, the bank gets a 24/7 settlement currency it controls. The structure can sit on the bank’s own balance sheet, inside a separately licensed subsidiary, or inside a consortium with peer banks.
- Third-party stablecoins. A third-party stablecoin is one the bank does not issue. The bank helps the customer to onramp to a stablecoin from another issuer, and the customer’s money leaves the bank’s balance sheet to fund the purchase. The upside is reach. The customer can settle on the widest range of venues, including the public crypto derivatives markets where most institutional weekend flow now clears.
Why banks will need all three
None of the three families is a strictly better answer than the others. A retail-deposit-heavy bank has a different answer from a transaction bank serving hedge funds and corporate treasuries. The bank with clients on its own permissioned networks faces a different question than the bank with clients trading on Hyperliquid.
Tokenized deposits defend the existing deposit franchise, but reach a narrow venue set. First-party stablecoins build an internal rail, but change the bank’s liability profile under Basel requirements. Third-party stablecoins access the widest liquidity pool, but externalize the customer claim. Each choice carries a specific cost and capacity release across LCR, NSFR, and risk-weighted assets.
Even within a single bank, institutional clients use different forms of settlement for different purposes. A hedge fund may post initial margin on the bank’s tokenized-deposit network, hedge weekend exposure with a third-party stablecoin, and rebalance through a consortium-issued first-party stablecoin. A bank that issues only one of these cannot fully serve that client.
The three families will coexist. Banks need to incorporate all three into their strategy, not pick one and ignore the rest. Our whitepaper, “Tokenized Money for Banks”, covers each product with its LCR and NSFR impact, deposit franchise trade-off, and the conditions under which it fits. Read the whitepaper.
