Banks Target Q4 Launch for Tokenized Deposit Network

A tokenized deposit network built by five banks and a blockchain-based platform led by former Comptroller of the Currency Gene Ludwig is expected to be available to the banks’ customers in the fourth quarter, Bloomberg reported Wednesday (Feb. 18).

The launch will follow a pilot program that is set to be run in the third quarter, Ludwig said in the report. Ludwig leads the blockchain-based platform Cari Network.

The five banks participating in the project are First Horizon, Huntington Bancshares, KeyCorp, M&T Bank and Old National Bancorp, according to the report.

The banks will initially use the network to move money only between their own customers. They could later connect the network with other networks, the report said.

Representatives of the banks told Bloomberg they are participating in the tokenized deposit network to be ready to offer their clients new products and services that become available, to explore ways to enable always-on settlement, and to allow fast, frictionless money movement.

In a Wednesday post on LinkedIn that referenced the Bloomberg report, Ludwig said: “Innovation in digital assets should strengthen, not displace, the regulated banking system. Tokenized deposits, built on sound blockchain infrastructure, can modernize payments while keeping insured deposits at the core of economic activity.”

PYMNTS reported in October that tokenized deposits (or deposit tokens) are digital representations of a bank deposit, backed one-for-one by money on the bank’s balance sheet, and issued via distributed ledger technology (DLT), also known as blockchain.

In January, PYMNTS CEO Karen Webster wrote that tokenized deposits will overtake stablecoins this year as the preferred on-chain dollar for institutional and wholesale money because banks will turn deposits into programmable infrastructure without breaking the existing financial system.

When BNY said in January that took the first step in its strategy to tokenize deposits, Carolyn Weinberg, chief product and innovation officer at BNY, said: “Tokenized deposits provide us with the opportunity to extend our trusted bank deposits onto digital rails, enabling clients to operate with greater speed across collateral, margin and payments, within a framework built for scale, resilience and regulatory alignment.”

Biswarup Chatterjee, global head of partnerships and innovation, Citi Services at Citi, told PYMNTS in an interview posted Feb. 6: “Within the bank’s network, tokenized deposits are an efficient way for our clients to be able to get that 24/7, always-on availability.”