Over the last two years, a new form of bank money has been emerging in the background: tokenized bank deposits. These instruments can look like stablecoins in a block explorer, but from a legal and economic point of view they behave much more like a standard bank account than like USDC or USDT.
Concrete projects make this visible. JPMorgan’s JPMD deposit token on Coinbase’s Base network, built on its Kinexys (formerly Onyx) infrastructure, is a clear example of a large bank putting deposits on public blockchain rails in a controlled way. Citi and other global institutions have been testing similar DLT-based cash instruments for institutional clients, signaling that traditional banks see tokenized deposits as a cornerstone of their on-chain strategy rather than a side experiment.
What a tokenized deposit actually is
A tokenized deposit is, in essence, a traditional bank deposit that is recorded and transferable on a distributed ledger instead of only inside the bank’s core systems. The underlying claim does not change: the customer still has a deposit claim on a regulated credit institution, subject to the same banking law, capital and liquidity rules, and typically the same deposit protection schemes as any other account.
JPMorgan, working with Oliver Wyman, describes deposit tokens as the equivalent of existing bank deposits represented on a blockchain, interoperable with traditional banking infrastructure and protected by the same safeguards that apply to commercial bank money. The European Banking Authority (EBA), in its dedicated report on tokenized deposits, reaches a similar conclusion. It stresses that simply recording the depositor’s claim on DLT does not in itself alter the fundamental nature of that claim or its qualification as a deposit.
In practical terms, the lifecycle is straightforward. A customer holds a deposit at a bank. The bank mints a corresponding token on its chosen DLT that represents that deposit one-for-one. That token can then move on the ledger, be pledged as collateral or interact with smart contracts. When the holder wants to exit back into the conventional account system, the bank burns the token and credits the regular deposit balance again.
The most visible live example today is JPMD, the tokenized deposit JPMorgan has piloted on Base. JPMD represents U.S. dollar deposits at JPMorgan held by institutional clients. The token runs on a public layer 2 but within a permissioned framework, with whitelisted addresses and full KYC. It is interest-bearing because it represents a deposit rather than a non-interest-bearing stablecoin, and it benefits from the protections and oversight that apply to bank deposits rather than from a separate crypto-asset regime. Under the hood, JPMD is integrated into the Kinexys payments and collateral infrastructure, which already processes significant volumes in blockchain-based institutional flows.
The novelty, therefore, is not a new form of money. It is the ability to move and program an existing form of commercial bank money on new rails, without changing its legal or prudential nature.
Why banks and regulators care
For banks, tokenizing deposits is not about launching a new coin. It is about upgrading their payment, treasury and settlement stack while keeping client money inside a familiar regulatory and balance sheet framework. Instead of pushing activity into non-bank stablecoins, they can bring on-chain capabilities into the existing deposit model.
On the efficiency side, both industry analyses and supervisory reports highlight programmability and automation as key benefits. Tokenized deposits make it possible to embed complex logic directly into payment flows: conditional settlement, intraday liquidity triggers, automatic sweeps across entities or jurisdictions, and atomic delivery-versus-payment with tokenized securities or collateral. Instead of reconciling multiple ledgers at the end of the day, firms can settle transactions in near real time with cash and assets moving together.
These benefits are already visible in early production deployments. Kinexys enables intraday repo and collateral movements that previously depended on market opening hours, manual reconciliation and cut-off times. Corporate use cases include programmable treasury structures in which deposit-like tokens move automatically when balances cross predefined thresholds, foreign exchange rates move beyond certain bands or risk metrics call for reallocations. In all of these cases, the institution keeps its relationship with a regulated bank and does not have to hold a separate pool of third-party stablecoins.
On the regulatory side, the main attraction is precisely that tokenized deposits are not a new category of money. The EBA’s report makes it clear that, when designed correctly, tokenized deposits remain deposits and are already covered by the existing Capital Requirements framework. At the same time, the report underlines how early the market still is: at the time of publication, the EBA identified only a single live tokenized deposit implementation in the European Economic Area, albeit alongside a growing pipeline of pilots and proof-of-concepts.
The underlying message to banks and supervisors is simple: you can use DLT for deposits, but we will treat them as deposits, not as lightly regulated crypto assets.
How tokenized deposits differ from stablecoins
From the perspective of a wallet or an explorer, a stablecoin and a deposit token can look similar: they are both digital units intended to track a dollar or euro on-chain. Under the surface, however, they are different instruments. A useful one-line contrast is that a fiat stablecoin is a claim on a segregated reserve pool, whereas a tokenized deposit is a claim on a bank balance sheet.
The first difference is the source of the claim. In a typical fiat-backed stablecoin, the holder has a claim on a non-bank issuer that promises to redeem the token for fiat and holds reserves in cash and short-term government paper. In a tokenized deposit, the holder has a claim on a commercial bank deposit that happens to be recorded on DLT. The balance sheet, prudential oversight and, where applicable, the deposit guarantee
