Tokenised deposits

A tokenised deposit is ordinary bank money on new rails. It is a deposit at a commercial bank, represented as a token on a programmable ledger, which stays a claim on the bank that issued it. The BIS describes it as designed to resemble the workings of regular bank deposits in the current system, issued by commercial banks and representing a claim on the issuer. Nothing about the underlying money changes. What changes is that it can now move and settle on infrastructure that can carry conditions and logic.

Why the balance sheet matters

The defining feature of a tokenised deposit is where it sits. It remains on a bank’s balance sheet, inside the two-tier banking system, and it settles among banks in central bank money. That last point is what preserves its value. The BIS notes that settlement in central bank money ensures the singleness of money and payment finality, which is the property that keeps a tokenised dollar at one bank worth exactly a tokenised dollar at another.

This is the cleanest way to see how a tokenised deposit differs from a stablecoin. A tokenised deposit is a claim on a regulated bank, is fractional-reserve bank money, and settles at par through central bank money. A stablecoin is a claim on a non-bank issuer, is fully reserved against a separate pool of assets, and depends on that issuer’s redemption promise to hold its value. Both aim to be digital money that moves easily; they rest on different foundations.

Where it is being used

Tokenised deposits are not a proposal. Major banks are running them. JPMorgan’s Kinexys platform, formerly Onyx, reports more than $7 billion in average daily transaction volume and trillions moved since inception, and Citi has launched Citi Token Services to put tokenised deposits to work in cross-border payments and trade finance. These run on private, permissioned systems today, which is a natural early step for regulated institutions.

The larger question, and the reason tokenised deposits sit at the centre of the settlement conversation, is connection. A deposit token that can only move within one bank’s private network is useful but limited. The value grows sharply when tokenised deposits, stablecoins, and other forms of digital cash can settle against each other on shared programmable settlement infrastructure, rather than each remaining locked in its own silo.