I think the same migration is now happening in payments, and most bank strategy conversations that I hear are still framed one layer too low. The rails, FedNow, RTP, ACH, wires, card networks, and now onchain networks, are starting to interoperate and commoditize. The instruments, tokenized deposits and stablecoins, are settling into a two tier structure that banks have already decided they need to support. The value that is compounding, and will compound fast, sits above the rails and the instruments. SWIFT, in announcing the move of its blockchain shared ledger to MVP this year, called it a “shared digital orchestration layer.” JPMorgan describes Kinexys as a control plane for money movement. The terminology is more than marketing I think. It is more a structural claim about where value capture is moving.

I do think that claim is right, with two qualifications. The terminology itself probably deserves more scrutiny than it usually gets. And the cloud computing analogy, which I hear many people using, breaks in a specific place that matters, the place where balance sheet, clearing, and settlement finality live. I think both qualifications change what a bank should actually do about it.

What “control plane” actually means

The phrase is actually borrowed from networking, and the original meaning is pretty precise. In a router, the control plane decides how packets get forwarded, the routing table, the protocols that maintain it, the policies that govern access. The data plane does the actual forwarding. The two are deliberately separated. AWS adopted the same distinction. The control plane is the API surface that lets you create, configure, and manage resources. The data plane is the resource itself doing its job. So even when the control plane fails, the data plane keeps running.

That distinction maps reasonably well onto payments. The rail, RTGS, ACH, FedNow, RTP, a tokenized deposit ledger, a stablecoin network, is the data plane. It moves the value. The orchestration layer is the control plane. It decides which rail, which liquidity pool, which FX path, which compliance wrapper. SWIFT’s own description of its forthcoming ledger reads like a textbook control plane definition: it records and validates interbank payment commitments, provides a synchronized view of obligations, sits above existing rails rather than replacing them.

The terminology fits, but with one caveat the cloud world doesn’t have. In networking, the data plane carries packets, which are pure information. Lose a packet, retry it. The forwarding decision is reversible at almost zero cost. In payments, the data plane carries money. Once a payment is final, it is final. The decision the control plane makes is not routing in the cloud sense, it is a financial commitment, often involving credit, FX risk, and settlement obligation. The control plane in payments doesn’t just route, it implicitly underwrites every routing decision it makes, or it relies on whoever owns the underlying balance sheet to underwrite it. That is what makes this layer harder to commoditize than its cloud equivalent, and what most of the orchestration narrative glosses over.

What the orchestration layer actually does

Strip the abstraction back, and I think the orchestration layer makes four decisions on every cross border or complex domestic transaction. Which rail. Which pool of liquidity. Which FX path. Which compliance wrapper. Each decision has to be made in real time, against the client’s stated outcome, and each has financial and regulatory consequences that don’t unwind cleanly.

Let’s take a corporate treasurer initiating a $50 million payment from a Singapore subsidiary to a German counterparty, due same day. The orchestration layer evaluates correspondent banking through SWIFT, the option of using SWIFT’s forthcoming blockchain ledger or Partior for 24/7 atomic settlement, the option of moving via the bank’s own tokenized deposit rail, the option of converting to a stablecoin and settling on a public chain, and the FX path for each. It applies sanctions, BSA, and credit checks against every leg. It picks the routing that meets the deadline at the lowest total cost including FX spread, fees, and any liquidity funding cost. It executes. It reports the outcome on a single screen, with the ability to override.

This is really not a user interface, nor is it a dashboard. It is a decisioning engine with embedded liquidity access, embedded FX execution, embedded compliance, and the authority to commit balance sheet on the client’s behalf. The screen is downstream of the decisioning. Cross border fintechs figured this out a decade ago, which is why Airwallex is now processing $266 billion in annualized transaction volume at a $1.2 billion ARR, and why Wise moved £181.7 billion across borders in its FY26 with 75% of transactions now settling instantly. Wise Platform, the white labeled version of its infrastructure, is now around 5% of the company’s cross border volume, which is to say banks are paying Wise to do their orchestration for them. Neither owns the rails. Both own the decisioning. Both are growing faster than the underlying market.

Banks have largely treated the customer screen as the product and left the decisioning fragmented across rail teams. That is not an aesthetic problem. To me, its really the reason the economics are leaking.

The work is harder than the headlines suggest

The work the control plane has to do is getting harder at exactly the same time the rails are getting cheaper. The rails are multiplying. A payment in 2026 might move across SWIFT, FedNow, the issuing bank’s tokenized deposit rail, Broadridge’s distributed ledger repo platform, Partior, Kinexys, a stablecoin on Base or Arc, or a hybrid path that uses several in sequence. Broadridge’s DLR alone processed $384 billion in average daily repo volume in December 2025, totaling close to $9 trillion for the month, and ran 508% year on year growth into January 2026. That is one rail, in one segment.

Now we have the instruments multiplying alongside the rails. Tokenized deposits at JPMorgan, HSBC, Citi, DBS, and various regional consortia. Stablecoins at $315 billion in circulating supply at the end of Q1 2026, with USDC at roughly $78 billion and the GENIUS Act rulemaking in train. Tokenized money market funds. Tokenized treasuries. Each instrument has its own settlement finality, its own legal framework, its own regulatory regime, its own operational hours, its own credit characteristics. The number of permutations a single payment might take is exploding, and each permutation puts a different combination of counterparty and compliance risk on the table.

The orchestration layer is what keeps that complexity legible to the client. Without one, the client makes rail and instrument choices on every transaction, which is exactly what the treasurer’s job is not. With one, the rails and instruments become fungible from the client’s point of view, and the bank’s value capture moves from operating any particular rail to operating the layer that routes across all of them.

Where the AWS analogy breaks

The cloud parallel is worth pushing on, because the economics it predicts are not subtle. In 2010, servers and storage were the expensive part of the IT stack. Enterprises bought hardware, depreciated it, and staffed teams to run it. The control layer was thin and often built in house. By 2025, the economics had inverted. Physical infrastructure became a commodity. The control plane became the product. The hyperscalers captured the value migration not because their servers are better, but because the coordination layer they operate is hard to replicate and gets stronger with each additional service they integrate.

The directional analogy holds for payments. The specifics break in three places that matter for any bank trying to position itself.

The first break is balance sheet. AWS commoditized compute because compute is fungible. A virtual CPU running a workload in Oregon is interchangeable with one running it in Ohio. Of course, money is fungible, but not quite fungible in that way. A dollar in a tokenized JPMorgan deposit account carries JPM’s credit. A dollar in USDC carries Circle’s credit and the credit of its reserve managers. A dollar in a stablecoin issued by a smaller player carries different counterparty risk again. The control plane in payments cannot route across these instruments without taking a view on the credit of each one, and the credit of each one is bound to a balance sheet the orchestration layer doesn’t own. Pure play orchestration fintechs hit this ceiling fast. Airwallex and Wise can route around correspondent banking elegantly, but they cannot route a $500 million corporate intragroup transfer the way Kinexys can, because Kinexys is implicitly backed by JPM’s balance sheet. When Mitsubishi adopted Kinexys for intragroup cash management in March 2026, the single transaction limit was $500 million. No fintech in the world can write that ticket! The control plane does not exist as a separate economic layer in that transaction. It is fused to the underwriter, and the underwriter is the bank.

The second break is the difference between routing and clearing. The orchestration layer chooses the rail. It does not, by itself, eliminate settlement risk. A control plane that picks a path and pushes a transaction through is doing routing. Clearing is what happens when obligations between counterparties are netted, validated, and finalized, and historically that has required either a balance sheet between them (correspondent banking) or a multilateral utility above them. CLS Bank settles over $8 trillion a day in FX, with peak days above $19 trillion, and reduces funding requirements by more than 96% through multilateral netting. That capital efficiency is a clearing achievement, not a routing one. It exists because CLS nets multilateral obligations across a closed set of currencies and members, with explicit settlement rules and loss-mutualization. The original lesson from Herstatt in 1974 was that settlement risk is what kills you when you assume the routing was the hard part.

Atomic settlement networks like Partior collapse routing and clearing into a single primitive, which is why their growth is real and why the founding banks invested. Atomic PvP eliminates the temporal gap that creates Herstatt risk in the first place. A routing engine sitting above multiple non atomic rails does not. It sequences transactions across systems that each have their own settlement finality, their own legal framework, and their own failure modes. The economics of orchestration are real. They are not the same as the economics of clearing. A bank that builds an elegant control plane on top of fragmented rails has built something useful, but it has not built CLS, and treating the two as equivalent is the mistake that gets noticed when something breaks.

The third break is concentration risk. The same property that makes a control plane valuable, coordination of complex systems through a single decisioning point, also makes it dangerous when it fails. The October 2025 AWS outage took down a long list of banks and fintech services that had not realized how dependent they had become on a single coordination layer. The FFIEC has been writing about cloud lock in risk since 2020 and the BIS has flagged it repeatedly. The same risk pattern transfers directly to payments orchestration. If a bank’s flow runs through a single proprietary control plane, an outage in that plane is an outage in the bank’s payments business. If an industry’s flow concentrates into a small number of orchestration providers, a failure in one becomes systemic. This is not theoretical. It is why regulators are watching the orchestration question, and why any bank thinking about ceding the layer to a third party should think hard about what operational resilience looks like in that world.

Who is trying to own the layer

The right way to read the current wave of institutional announcements is not which bank is issuing which instrument, but which institution is making a credible run at the decisioning layer above the instruments. Four categories of competitor are visible. A fifth is harder to name but is already taking flow.

The first is the incumbent network operators, with SWIFT the cleanest example. SWIFT completed the design phase of its blockchain shared ledger in March 2026 and is targeting a live MVP running tokenized deposit payments before the end of the year, with more than 40 banks participating. The architecture is explicitly orchestration. SWIFT will operate the ledger, validate funding commitments, coordinate interbank workflows, and reuse existing compliance processes. The phrase “shared digital orchestration layer” appears in the official announcement. SWIFT is making a serious bid to migrate from messaging layer of the old rails to coordination layer of the new ones, with the same network of 200-plus jurisdictions. If that succeeds, SWIFT preserves its position. If it fails, SWIFT faces the harder problem that messaging and decisioning are different businesses with different economics.

The second is the mega bank platforms. Kinexys is the most visible, processing roughly $7 billion a day with cumulative volume above $3 trillion since launch in 2020, and a public target of $10 billion daily. JPMorgan, Citi, HSBC, BNP Paribas, and a handful of others are building similar capability. The advantage is structural. The bank’s balance sheet is already underneath the platform, which means liquidity and FX are native rather than bolted on. Demand from the bank’s existing corporate base is built in. The disadvantage is that a single-institution platform has interoperability limits unless it opens up. Kinexys has started doing exactly that, with cross-chain settlement work and a corporate pipeline that now extends to Mitsubishi, Siemens, Brevan Howard, BlackRock, and LSEG. Whether mega banks can credibly run an industry-wide orchestration layer, or whether they end up running multiple competing single-institution layers, has not been settled. The answer matters for everyone else in the stack.

The third is the consortia. Partior, founded by JPMorgan, DBS, and Standard Chartered, with Deutsche Bank and Emirates NBD now investors, runs 24/7 atomic multi-currency settlement and describes itself as an “interoperable neutral network” enabling orchestration across platforms. Deutsche Bank’s head of cash management, after the bank’s first euro-denominated transaction on Partior in late 2025, framed the entire strategy in orchestration terms

Project Agorá at the BIS Innovation Hub is doing similar work for the official sector. Consortia have legitimate neutrality, which is their main advantage, and slow governance, which is their main constraint. They tend to win where no single bank has pricing power and lose where one does.

The fourth is the fintechs. Airwallex, Wise, Stripe, BVNK, and a long list of specialists are building orchestration top down, starting from client experience and acquiring rail access as they grow. The advantage is design discipline and speed. The disadvantage, as covered above, is that they hit a balance sheet ceiling at a certain transaction size and a regulatory ceiling at a certain flow type. This category is taking the most market share at the SMB and mid market levels, and is the most likely to be acquired or partnered by a bank, consortium, or payment network that wants the technology and does not have time to build it.

A fifth category, harder to name, is the stablecoin issuers. When a stablecoin becomes the settlement asset for a payment, the issuer is part of the orchestration fabric whether it markets itself that way or not. Circle’s CCTP is explicitly an orchestration network for USDC across chains. Tether’s dominance in certain emerging market corridors is a de-facto orchestration layer that bypasses banks entirely. Visa is now settling stablecoin volume at a $4.5 billion annualized run rate. The GENIUS Act rulemaking over the next few months will set the terms on which this category competes against the bank led options.

Infrastructure inversion, again

For two decades the valuable part of financial services sat at the application layer, the consumer fintech UX, the small business front door, the embedded finance integration. Most venture investment in the sector flowed there because that was where the customer facing differentiation lived. The migration has reversed. Value is now moving back down to the infrastructure layer, and I think specifically to the orchestration layer that sits just above the rails and instruments. The companies that own that layer will be the picks and shovels of the next decade of financial services, the way the hyperscalers became the picks and shovels of the software industry.

The orchestration layer in payments is not perfectly analogous to the cloud control plane, because money is not perfectly analogous to data. Balance sheet, clearing finality, and concentration risk shape who can credibly own the layer and how much of it any one institution should try to own. A bank that participates only as a rail operator, in a world where the orchestration layer is forming above it, ends up in the position of a hardware company in a software industry. The rail will be used, but the revenue will be thin and the client relationship will sit one layer up.

The right question for a bank strategy review in 2026 is really not whether to do onchain payments, or even whether to issue a tokenized deposit. It is what position the bank will hold in the orchestration layer that is forming. Operate one or more rails and cede the layer. Participate in a consortium and share it. Or build a proprietary version that can eventually open up. None of those is to sit out. The layer is being built and the question is which seat at which table.

Clients buy certainty. Rails deliver commodities. The orchestration layer is where certainty gets constructed, and the institutions that figure out how to construct it without becoming a single point of failure are the ones that will get paid.

References

• AWS Q4 2025 earnings, CNBC: $35.6B revenue, 24% YoY growth, $142B run rate, 35% margin

• Swift’s blockchain-based shared ledger progresses to MVP, SWIFT: “shared digital orchestration layer,” March 2026

• Kinexys by J.P. Morgan: $7B daily, $3T cumulative since 2020, $10B daily target

• Mitsubishi Corporation adopts Kinexys Digital Payments, JPMorgan: March 2026

• Broadridge DLR processes ~$9T in December, Broadridge: $384B average daily volume

• Broadridge DLR achieves 508% YoY growth in January, Broadridge

• Deutsche Bank conducts first euro transaction via Partior, Deutsche Bank: September 2025

• Partior: JPMorgan, DBS, Standard Chartered, Deutsche Bank, Emirates NBD

• Airwallex 2025 end-of-year mission update: $266B annualized volume, end-2025

• Airwallex revenue and valuation, Sacra: $1.2B ARR, March 2026

• Wise plc investor relations: £181.7B FY26 cross-border volume, 75% of transactions instant, Wise Platform ~5% of volume

• Total stablecoin supply, DefiLlama: $315B end Q1 2026

• Q1 2026 Stablecoin Report, Stablecoin Insider

• Visa stablecoin settlement statistics, Stablecoin Insider: $4.5B annualized run rate, January 2026

• CLSSettlement, CLS Group: ~$8T daily settlement, 96% funding reduction via multilateral netting

• The day the internet broke banking, The Financial Brand: October 2025 AWS outage analysis

Once tokenized US equities can sit at the same address as tokenized US Treasuries, tokenized money market funds, tokenized private credit, stablecoin balances, and bitcoin, the question of what an “account” is really starts to fall apart. Or I suppose more precisely, the question of where the customer relationship lives starts to fall apart.

I think there’s a bit of a vocabulary problem in tokenized finance, and it tells you almost everything about who is best positioned for what is coming. Bankers and fintech operators say “account.” They mean a balance with a name on it, a card attached, a statement, KYC, send and receive across rails, an entry in a ledger somewhere. Crypto native builders say “wallet.” They mean an address, a set of keys, control over assets onchain. Both groups think they are talking about roughly the same object dressed up in different clothes. They’re really not.

The vocabulary diverged because the worlds did. Banks issued accounts because banks held one type of asset, cash deposits. Brokers issued accounts because they held another, securities. Fund custodians issued accounts because they held another, fund interests. The architecture of retail finance was always a set of single asset institutions, each with its own account primitive, each organized around the asset class it was licensed to hold. The “account” was never an abstraction over assets. It was a ledger entry inside a specific institution that could only hold the specific thing that institution was allowed to hold.

The wallet was different from the start. Bitcoin had no banking layer. Ethereum had no banking layer. The wallet was not a slice of an institution’s ledger, it was an address that held whatever could be expressed onchain. From the inside, that looked like a primitive. From the outside, to bankers, it looked more like a toy.

It was not a toy. Actually I think about it as the bundle.

The Merrill precedent

In 1977, Merrill Lynch introduced the Cash Management Account. The CMA combined a brokerage account, a money market fund sweep, check writing, and a Visa card. The cash from your trading account did not sit idle, it swept overnight into a money fund earning market rates. You could write a check against the money fund balance. You could spend on the card and you could buy and sell securities. One statement, one provider, one consolidated view of the customer.

Banks at the time were furious. Through the late 1970s and early 1980s, they sued, lobbied, and ran campaigns to stop the CMA on the grounds that Merrill was effectively a bank operating without a banking license. They lost. By 1981, four years after launch, Merrill had 300,000 CMA customers. By the mid 80s, more than a million. The reason banks were angry was not that Merrill had built a better product. It was that Merrill had bundled four previously separate institutional relationships into one, and the bundle was a different kind of object from anything banks were licensed to build.

Money funds in the late 1970s grew because Regulation Q capped what banks could pay on deposits while inflation ran above the cap. That meant the deposits left. Merrill’s innovation was not the money fund itself, it was wrapping the money fund inside an account that also did checking, lending, and securities, so that the customer never had to leave the broker for any reason.

That is probably the optimistic reading of the precedent. I think the honest reading is really interesting.

Why the CMA stalled

The CMA succeeded as a product and failed at consolidation. The product became a category every broker copied. But the customer relationship did not actually migrate away from banks. Most CMA holders kept their checking account at a bank. The bundle captured the affluent investor’s cash and securities slice. It did not capture the customer’s financial life. Three things stalled it.

The first was that the regulatory arbitrage closed. The CMA was substantially powered by Regulation Q, which capped what banks could pay on deposits while inflation ran above the cap. The Depository Institutions Deregulation and Monetary Control Act of 1980 began the phaseout, and by 1986 the cap was gone. Once banks could pay market rates, the asset drain Merrill was exploiting largely stopped. The bundle’s pull weakened in lockstep with the spread.

The second was that Glass-Steagall capped the bundle. Merrill could not actually offer a deposit account. The “checking” inside the CMA was check writing against a money fund. The card was issued by a partner bank. The credit was margin against securities. So Merrill never held the customer’s primary bank relationship in any chartered sense. The bundle was operationally incomplete because the regulatory perimeter did not let one institution hold cash, securities, and credit at the same time.

The third was cost structure. The CMA’s operational economics required affluent balances, with a $20,000 minimum at launch. The bundle never really became a mass market financial container, because the unit economics of running brokerage operations, money fund servicing, check clearing, and card processing for a single customer did not work below a certain balance. Banks kept the mass market by default.

Then banks counter bundled. Through the 1980s and 1990s they built their own brokerage and money fund products, and by the time Glass-Steagall was repealed in 1999 the bank built bundle was close enough that the broker built bundle had lost its decisive advantage. Schwab and Fidelity competed Merrill down. The customer relationship redistributed across institutions rather than consolidating into one. The bundle settled into a category, and not a winner.

So you might conclude from the CMA precedent that the bundle is real, but it stalls when the structural arbitrage driving it closes, when the regulatory perimeter stops a single operator from holding the full asset stack, and when the cost structure forces the bundle to stay premium. Three constraints. I think it’s worth holding each one up against the wallet to see whether it binds the same way.

Why the wallet is not the CMA

The wallet does not depend on regulatory arbitrage. Its advantages, treasury optimization across asset classes, multi asset collateralization, native data on the customer’s full balance sheet, scoped delegation to autonomous agents, are structural and technology driven. They do not turn on a yield spread that can close. They do not weaken when interest rate regimes shift or when stablecoin yield rules tighten or loosen. The CMA’s pull was substantially a Reg Q artifact. The wallet’s pull is not an artifact of any single regulation.

The wallet has no Glass-Steagall problem. The wallet operator does not need to hold the assets in the chartered sense. The token is the legal share, the legal Treasury claim, the legal money fund interest, with the issuer and the transfer agent and the custodian of record sitting where the law requires them to sit. The wallet operator holds the keys, routes the flows, and serves the customer. The legal perimeter follows the asset, not the operator. There is no equivalent to the wall that prevented Merrill from holding deposits.

The wallet’s cost structure runs on shared infrastructure. The chains, the settlement, the smart contract logic that holds the assets are not paid for per customer by the wallet operator. The marginal cost of adding a customer is closer to zero than to the per account operational cost of running a brokerage. The premium only constraint that kept the CMA an affluent product does not apply here.

What does carry over from the CMA story is the counter bundling risk. Banks counter bundled Merrill, and they will try to counter bundle the wallet. The question is whether they can? To counter Merrill, banks had to build a brokerage division and a money fund. To counter the wallet, they have to stand up a multi asset, programmable, agent ready container that holds tokenized everything across jurisdictions on shared infrastructure. That feels like it’s a much bigger transformation than spinning up a brokerage. Some banks will get there. A lot will not. Which banks land where is the really the question, and I think it’s an institutional design question more than a technology one.

What the wallet absorbs

This is where the numbers start to matter. Stablecoin float crossed $320 billion in May 2026. Tokenized real world asset value hit $26.4 billion in March, up from $6.6 billion a year earlier, roughly four times the prior year. BlackRock’s BUIDL, the tokenized Treasury fund, sits at around $2.85 billion and accounts for roughly forty percent of the tokenized Treasury market, which itself has crossed $5 billion. The Computershare and Securitize agreement opens a structural pathway for the roughly $70 trillion of US listed equity to issue directly onchain. Six asset categories have each crossed the $1 billion mark: private credit, commodities, US Treasuries, corporate bonds, non-US sovereign debt, and institutional alternative funds.

None of those numbers individually look big in the context of US household financial assets, which run somewhere north of $120 trillion. The point is the trajectory of what fits inside a single address. A year ago, a wallet held stablecoins and a few experimental Treasury tokens. Today it can hold short dated Treasuries, money market interests, private credit positions, gold, corporate debt, bitcoin, and, pending the Computershare flow scaling, public equities. The asset categories that previously required separate institutional relationships are arriving into the same container, one after another.

This is what makes the wallet the bundle. Not the token standard. Not the chain. The fact that the container is asset agnostic in a way that no banking, brokerage, or custody account has ever been.

The economic gravity of the bundle

Once you hold a customer’s full balance sheet in one place, four things change in the operator’s favor, and I think they all compound.

The first is treasury optimization. If a customer’s idle dollars and their tokenized money market fund holdings live at the same address with sub second conversion between them, there is no reason for cash to sit idle. Whoever owns the wallet can offer auto routing, where cash sweeps into the highest yielding tokenized money market fund the customer’s profile permits, and routes back to spendable balance the moment a payment is initiated. This is not a premium service. It is a default feature that makes idle cash an unforced error. The yield debate currently consuming the regulatory conversation around stablecoins becomes structurally less interesting once treasury automation is one click below the surface, because the spendable balance does not have to pay yield if the wallet’s other holdings do.

The second is collateralized lending. When a customer’s cash, Treasuries, equities, private credit, and bitcoin all live in one address, lending against the consolidated balance sheet becomes one underwriting decision instead of five. Margin calls become a programmatic operation against the wallet rather than a phone call to a different institution. The credit product the wallet operator can offer is structurally better than what any single asset incumbent can offer, because the single asset incumbent only ever sees a single asset.

The third is data. Whoever holds the wallet sees the customer’s full financial life: what they hold, what they earn, what they spend, what they save, what they trade. That is the dataset banks have been trying to assemble for forty years through aggregation, account to account data sharing, and open banking mandates. The wallet operator gets it natively, not because of a regulatory regime, but because the data is structurally co-located with the assets.

The fourth is that agents need wallets, not accounts. An autonomous agent that can pay an invoice, rebalance treasury, settle a trade, and move funds across rails needs scoped access to a portfolio, not a checking balance. The wallet is the natural surface for delegation because it is the surface that has the assets. The “account” is a thin slice of one asset class. Useful for cards and rails. Useless as the primary delegation surface for anything more sophisticated.

Where the platforms are pointed wrong

Most of the platform level conversation right now is still pointed at the account. Marketplaces want to issue their users a dollar account. Creator platforms want to issue their creators a dollar account with a card. Remittance companies want to give their recipients a dollar account they can spend from. Each of these is a real improvement over the status quo, where the platform pays out to an edge bank in another country and loses the customer relationship the moment the cash lands. None of them are the actual prize.

The actual prize is issuing the user a wallet. The dollar balance is one of the assets that wallet holds. The platform that issues a wallet is, eventually, holding the user’s tokenized treasuries, their tokenized money fund position, their bitcoin savings pocket, their tokenized share of the platform’s own equity if the platform is public, and the spendable dollar balance that pays for things in the meantime. The platform that issues a dollar account is holding only the spendable balance, which is the fraction of the customer’s financial life with the lowest yield, the lowest stickiness, and the most competition.

I think this is the move most platforms are not going to make in time. Issuing a wallet is a bigger commitment than issuing an account. It implies standing up custody operations, asset class specific compliance, surveillance, governance over the smart contracts that hold the assets, and a customer support function that can answer questions about more than dollars. It implies hiring people who understand securities operations, not just payments. It implies being a balance sheet relationship, not a payments endpoint.

The platforms that get there first will look like Merrill Lynch in 1981. The platforms that do not will look like the regional banks that watched 300,000 customers walk out the door and decided the problem was probably regulatory.

Different kind of institution

A bank competing to be the wallet operator is not competing to be a bigger bank. It is competing to be a different kind of institution. The economics per asset class are smaller than holding the assets directly, but the relationship spans every asset class, which is the trade incumbents have not had on offer before. Most of them are not currently set up to take it. Their internal systems, their compliance organizations, and their product teams are organized around single-asset operations. The wallet is multi asset by definition. The pivot is closer to what cloud migration was for IT departments than to anything in the recent banking playbook, except with charters and capital requirements wrapped around it.

The vocabulary tells you who is serious

When a banker walks into a tokenization conversation and starts asking which “account” the customer holds, what they are revealing is not a translation issue. They are still operating inside a frame where one institution holds one asset class on behalf of the customer. When a crypto native builder treats the wallet as a primitive that the customer manages alone, what they are revealing is that they have not yet thought about who serves the customer when the wallet contains a tokenized share of Apple, a tranche of private credit, and a money market position. Both vocabularies are partial, and the institutions that figure this out first are the ones already trying to bridge the two.

The signs are visible across several institutions building wallet infrastructure with the operational discipline of a custodian and the compliance perimeter of a broker, absorbing each new asset class as it tokenizes. Computershare and Securitize, opening the path for tokenized US equities. BlackRock’s BUIDL extending across multiple chains. State Street’s tokenized fund servicing. Coinbase Prime’s institutional flows. The remittance and creator platforms experimenting with branded dollar accounts are an early, incomplete version of the same instinct.

None of these institutions are calling what they are building “the wallet.” Most are still calling it an account, or a custody product, or a tokenization platform. The naming is lagging the architecture, which is normal. Merrill did not call the CMA “the bundle” either. It called it a cash management account, and it took the banks half a decade to figure out what they were actually losing.

The account is not going away. It is being absorbed. The product the customer sees may still have a name like “global account” or “checking account” or “treasury account.” Underneath it will be a wallet that holds the spendable balance and everything else. The institution that operates that wallet holds the customer relationship. The name on the front door is a marketing question. The name on the keys is a structural one.

The wallet is the new bundle. The institutions that understand that are building the infrastructure for it. The institutions that do not are competing for the spendable slice of a balance sheet they no longer get to see.

References

• Securitize and Computershare announce agreement to enable tokenized shares for U.S. issuers (April 29, 2026)

• Securitize, Computershare open path for $70 trillion in U.S. stocks to move onchain (CoinDesk)

• Tokenized Real-World Asset Value Jumps Fourfold to $26 Billion (PYMNTS, 2026)

• BlackRock BUIDL Tokenized Treasury Fund Hits $2B AUM (Blocklr, 2026)

• BlackRock USD Institutional Digital Liquidity Fund (Securitize)

• Stablecoin Liquidity Hits $320.6B Milestone in May 2026 (KuCoin)

• 75 Years of Innovation: Cash Management Account (SRI International)

• When Merrill Lynch Broke Banking (FinTech Prof Substack)

• Dividends: Battle over the CMA Clones (TIME magazine archive)

• US Federal Reserve Z.1 Financial Accounts of the United States

Mastercard gets NY BitLicense, signaling shift to direct stablecoin settlement

Mastercard Transaction Services has obtained a New York BitLicense from NYDFS, enabling the payments giant to transmit and settle directly in stablecoins without relying on third-party licensed intermediaries — a structural shift that positions Mastercard to compete as a direct digital currency settlement rail rather than merely a network overlay. For banks and payment institutions, this signals that major card networks are building native stablecoin settlement capability, not just partnerships.

https://www.ledgerinsights.com/mastercard-gets-ny-bitlicense-signaling-shift-to-direct-stablecoin-settlement

SoFi launches native stablecoin to all its banking customers

SoFi has launched SoFiUSD, the first stablecoin issued by a U.S. national bank, to all 14.7 million of its banking customers on Ethereum and Solana, with plans to follow with tokenized deposits. This is a landmark moment: a federally chartered bank is now distributing a bank-issued stablecoin at consumer scale, testing the boundary between traditional deposit-taking and programmable digital money.

https://www.americanbanker.com/news/sofi-launches-native-stablecoin-to-all-its-banking-customers

Paxos Securities Settlement Company Receives Clearing Agency Registration from the U.S. Securities and Exchange Commission

Paxos has received formal SEC registration as a clearing agency for its blockchain-based securities settlement business, marking the first time a blockchain settlement firm has obtained this designation from U.S. regulators. This clears the path for on-chain equities settlement to operate within the regulated U.S. market structure, with significant implications for post-trade infrastructure.

https://www.paxos.com/newsroom/sec-registers-paxos-securities-settlement-company-as-a-clearing-agency

DTC tokenization service to add Stellar as second public blockchain

The Depository Trust Company (DTC) has announced it will connect its tokenization service to Stellar as a second public blockchain by H1 2027, expanding beyond its existing chain and signaling that the world’s largest securities depository is building a multi-chain strategy for tokenized asset settlement. This is a major infrastructure commitment from the heart of U.S. market plumbing.

https://www.ledgerinsights.com/dtc-tokenization-service-to-add-stellar-as-second-public-blockchain/

Nium joins Circle Payments network

Nium and Circle have partnered to connect USDC stablecoin settlement with last-mile fiat payouts in over 190 countries, integrating stablecoin rails with Nium’s global real-time payments network. For treasury and cross-border payments teams, this combination of regulated stablecoin liquidity with local currency delivery represents a meaningful upgrade to correspondent banking corridors.

https://www.finextra.com/pressarticle/109961/nium-joins-circle-payments-network

Regulation & Policy

Press Release: FDIC Board Approves Proposal to Address Bank Secrecy Act and Sanctions Compliance Standards for FDIC-Supervised Permitted Payment Stablecoin Issuers

The FDIC board has approved a proposed rulemaking to establish Bank Secrecy Act and sanctions compliance standards specifically for FDIC-supervised stablecoin issuers, proposing that such institutions pre-clear AML actions with FinCEN. This is the first U.S. bank regulator to propose a dedicated AML compliance framework for stablecoin issuers, and it will shape how banks structure any stablecoin programs going forward.

https://content.govdelivery.com/accounts/USFDIC/bulletins/41889d8

Piero Cipollone: Money in the digital age

ECB Executive Board member Piero Cipollone delivered a speech on ‘Money in the Digital Age,’ signaling continued ECB attention to how digital money — including stablecoins and the digital euro — is reshaping monetary architecture. Remarks from an ECB board member on this topic carry direct policy weight for European banks navigating MiCA compliance and digital euro preparations.

https://www.ecb.europa.eu//press/key/date/2026/html/ecb.sp260528_1~7bb2eecfe5.en.html

Sarah Breeden: Modernising money and markets

Bank of England Deputy Governor Sarah Breeden delivered a speech titled ‘Modernising Money and Markets’ at City Week 2026, outlining the BoE’s framework for how tokenisation and digital money fit within its financial stability mandate. This speech is essential reading for UK financial institutions planning tokenized deposit or stablecoin initiatives under the evolving regulatory perimeter.

https://www.bis.org/review/r260526b.htm

Research & Analysis

Project Agorá shows how tokenisation can improve wholesale cross-border payments; work will advance to real-value testing

The BIS has published the full results of Project Agora, its two-year collaboration with seven central banks and over 40 private institutions, demonstrating that tokenized wholesale cross-border payments can settle atomically in seconds while preserving settlement finality in central bank reserves. The project will now advance to real-value testing — a pivotal step that moves tokenized interbank settlement from proof-of-concept to pre-production validation.

https://www.bis.org/press/p260527.htm

Tokenized Money

Bank of Canada joins BIS Project Agorá to test improvements in wholesale cross-border payments

The Bank of Canada has formally joined BIS Project Agora, confirming its participation in real-value testing of tokenized wholesale cross-border payments. Canada’s entry into the real-value testing phase underscores the broadening central bank consensus that tokenized reserve money is a viable path to reforming correspondent banking infrastructure.

https://www.bankofcanada.ca/2026/05/bank-canada-joins-bis-project-agora-test-improvements-wholesale-cross-border-payments

It really is the wrong question. The US monetary system has been two tier for more than a century. Central bank money sits at the top, held only by banks as reserves at the Fed. Commercial bank money sits below, held by households and businesses as deposits. The two tiers settle against each other through the Fed’s payment infrastructure, and the interoperability between them is what makes the whole system work. Tokenization does not collapse that structure. It reproduces it onchain. The question is not which form of money wins. The question is how the two tier logic gets rebuilt with programmable instruments, and who owns the settlement fabric between them.

That is a harder, more interesting problem than the binary. And it is the one the banks that are actually moving have already started solving.

The two tier model, briefly

Allow me to briefly remind you why this structure exists. Reserves at the central bank are the ultimate settlement asset in a national monetary system. They are a direct liability of the Fed, carry no credit risk against any private counterparty, and are the instrument that interbank obligations clear in. Commercial bank deposits are a different instrument. They are a liability of the issuing bank, carry the credit risk of that bank, and function as the day to day medium of exchange for the real economy. The two tiers are connected by the fact that every commercial bank deposit is ultimately backed by that bank’s claim on reserves, and that interbank transfers of deposits settle in reserves at the central bank.

This is not a theoretical design choice. It is actually the structure that allows the system to scale. The Fed does not want to process every consumer payment. Commercial banks do not want to hold all settlement risk directly on a central bank balance sheet. The two tier model distributes credit creation, customer relationship, and liquidity transformation to commercial banks, while keeping the ultimate settlement asset at the central bank. Every functional monetary system in the developed world has some version of it.

When people talk about tokenizing money, what is actually happening is that each of those tiers is getting a new digital instrument. A wholesale central bank digital currency, or a tokenized reserve equivalent, serves the settlement asset tier. Tokenized deposits serve the commercial bank money tier. Stablecoins, depending on how they are structured, sit somewhere on the spectrum between the two, and that spectrum is where most of the analytical confusion lives.

What stablecoins actually are

A dollar pegged stablecoin is a bearer instrument denominated in dollars, fully reserved 1:1 against some combination of short dated Treasuries, reverse repo, and bank deposits. It is not a deposit liability of the issuer, carries no FDIC insurance, and sits in a segregated reserve pool the issuer cannot lend against. Under the GENIUS Act, payment stablecoins can be issued by three categories of entity: insured depository institution subsidiaries supervised by their primary federal banking regulator, federally licensed nonbank issuers supervised by the OCC, and qualifying state-licensed issuers below the size threshold. The largest issuers today — Tether and Circle — are nonbanks, but the framework is deliberately bank-inclusive. A nine-bank G7 consortium that includes Goldman Sachs, Deutsche Bank, BNP Paribas, Citi, and Bank of America has announced a jointly backed stablecoin, and several large banks have signaled they intend to issue under the new framework. USDC and USDT together account for over four fifths of the roughly $316 billion stablecoin market as of Q1 2026, with USDT at roughly $184 billion and USDC at $78 billion. USDC crossed a meaningful threshold recently, capturing 64 percent of adjusted stablecoin transaction volume for the first time since 2019, driven by institutional preference for the regulated instrument under the GENIUS Act framework. The overall market crossed $320 billion in the second quarter.

What makes a stablecoin structurally different from a tokenized deposit is not the peg or the issuer, under GENIUS a bank can issue either, it is the legal characterization of the instrument and the settlement model that follows from it. A stablecoin is a bearer token, fully reserved against HQLA, segregated from the issuer’s balance sheet, not subject to fractional-reserve treatment. A tokenized deposit is a deposit liability of the issuing bank, backed by that bank’s balance sheet, FDIC insured to the limit, fractional reserve, and subject to the bank’s capital and liquidity rules. The settlement model follows from that distinction. A stablecoin transaction is the bearer transfer of a token from one wallet to another. It settles onchain, finally, in minutes. No bank sits between the two parties. Neither party needs to have a relationship with the other’s bank, or indeed with any bank, to receive value. The instrument is designed for use cases where you want dollar exposure without bank credit exposure, or where the two parties to a transaction do not share a common banking infrastructure. That is a real set of use cases. Cross border commerce between parties in jurisdictions where correspondent banking is slow, expensive, or politically contested. Crypto native trading and custody. Onchain settlement of tokenized assets where the payment leg has to match the asset leg atomically. 24/7 programmable payments between entities that are not commercial bank customers of any single bank.

The BIS has been blunt about what stablecoins are not. In its 2025 annual report, it argued that stablecoins do not deliver “singleness of money, elasticity, and integrity,” and should play at most a subsidiary role in the financial system if adequately regulated. That position is defensible as a statement about what you would want the backbone of a monetary system to look like. It is not a statement about whether stablecoins solve any real problem. They solve an obvious problem. They move bearer dollar value across the internet at near-zero cost, instantly, between parties who do not know each other. No existing instrument does that, and that is why the market cap is over $300 billion.

What tokenized deposits actually are

A tokenized deposit is commercial bank money issued onchain. It remains a liability of the issuing bank, carries the credit risk of that bank, remains subject to the same capital, liquidity, BSA, and AML frameworks the bank’s other deposits are subject to, and is fully redeemable against that bank’s balance sheet. What is different is the representation. Instead of a ledger entry in the bank’s core deposit system, it is a token on a permissioned or hybrid blockchain. The token can be programmed. It can move between wallets on the same network in seconds. It can settle against tokenized assets atomically. It can carry metadata that conditions its own movement.

This is the instrument that the global systemically important banks have chosen. JPMorgan’s Kinexys platform (formerly Onyx, launched in 2020) is processing over $5 billion in daily transactions and has moved more than $3 trillion in cumulative volume since inception, much of it in tokenized deposits. JPMorgan’s tokenized USD deposit, now branded JPMD, went live on Base in late 2025, with Polygon, Arbitrum, and Ethereum mainnet on the announced multi-chain roadmap, extending what was an internal settlement asset out into public infrastructure under a permissioned model. HSBC launched tokenized deposit services in Hong Kong and Singapore in 2025, extended to the UK and Luxembourg, and announced expansion to the US (live April 2026) and the UAE in 2026. Citi, DBS, Standard Chartered, and Deutsche Bank all offer or settle on tokenized deposit infrastructure for institutional clients — DBS and Standard Chartered as founding banks of Partior, Deutsche Bank as a euro and dollar settlement bank on Partior since May 2025, and Citi through Citi Token Services. The Cari Network, announced in Q1 2026, is a five bank consortium of regional lenders — Huntington, First Horizon, M&T, KeyCorp, and Old National — building on ZKsync’s Prividium for shared-ledger tokenized deposits across US regional banks.

What tokenized deposits are good for is the universe of use cases where the client has a banking relationship and wants the movement logic of bank money to become programmable. Intraday liquidity across a multinational’s entities. Cross-border intra-bank transfers that currently sit inside the SWIFT messaging model. Delivery versus payment settlement against tokenized securities. 24/7 movement between corporate accounts at the same bank or between banks on a shared network. These are flows where the user wants the credit quality and legal framework of bank money, and wants to keep that relationship with the bank. They want what the bank already provides, with the additional property of being programmable and real-time.

The two instruments are not substitutes

This is the bit that gets lost in the binary framing. Stablecoins and tokenized deposits are not competing products aimed at the same customer. They are different instruments aimed at different flows. A corporate treasurer moving liquidity between the firm’s Luxembourg and New York entities wants tokenized deposits. A crypto native trading firm settling a large OTC trade with a counterparty on a Saturday wants a stablecoin. A US importer paying a Vietnamese supplier may want one, the other, or a hybrid, depending on whether the supplier has a bank relationship, which jurisdictions the flow is crossing, and whether the payment needs to settle against a bill of lading token.

The actual problem is the settlement fabric

Here is where I think the analysis gets structurally interesting and where most of the commentary falls a bit short. If you accept that both instruments will exist, and that they will serve overlapping but non identical use cases, then shouldn’t the question be what does the settlement fabric between them look like? When a stablecoin has to convert into a tokenized deposit, who runs that conversion, at what timing, against what collateral, with what legal finality. When a tokenized deposit at Bank A has to settle against a tokenized deposit at Bank B, and the two banks are on different networks, what does the bridge look like. When a tokenized Treasury is purchased with a stablecoin and needs to settle delivery versus payment, which ledger is the ledger of record and who reconciles if the two legs fail.

This is what Project Agorá at the BIS Innovation Hub has been working on, and it is what the Regulated Settlement Network and Partior and SWIFT’s blockchain trials are all aimed at. It is also what the Fed’s continued interest in a wholesale tokenized settlement asset is trying to answer from the public side. The work is not done. The standards are not set. The legal and operational finality of cross network settlement is still being built. The banks that understand this problem and have a position on how to solve it are the banks that are going to own the settlement layer of the next generation of money. The banks that treat this as a product-selection question and pick tokenized deposits or stablecoins as though the choice is terminal are one layer too shallow in the analysis.

The historical analogy here is the money market fund era of the late 1970s and 1980s. Regulation Q capped the interest rate banks could pay on deposits. Money market funds offered a substitute that paid market rates. Banks lost a huge amount of deposit share to MMFs before the regulatory response caught up. Critically, the structure that eventually stabilized was not banks beating MMFs or MMFs replacing banks. It was coexistence, with a new settlement and redemption fabric that allowed household and institutional money to flow between bank deposits and MMF shares continuously, depending on the relative economics. Banks that fought the existence of MMFs lost ground. Banks that built products and services that interoperated with the new instrument class kept the customer relationship. The MMF episode produced decades of eurodollar, sweep account, and money market deposit account innovation that became core bank products. The technology changed but the two tier logic did not.

It feels like the same pattern now. Stablecoins are the money market fund of this cycle. Tokenized deposits are the deposit side response. The eventual steady state is coexistence with a functioning settlement fabric between them, and the economics will flow where the economics flow based on use case. The banks that fight this by trying to kill stablecoins or refusing to build tokenized deposits are gonna repeat the 1980s, slowly. The banks that build a position on both, with a clear point of view on the settlement architecture between them, are running the 2026 version of what Citi and Chase were running in 1985.

Ok, so what should banks actually do?

The practical implication is pretty unglamorous. Every bank with a corporate franchise needs a tokenized deposit program, because that is what defends the client deposit relationship when the client starts programming their treasury. Every bank that services onchain counterparties, or that wants to service them, needs a stablecoin capability, either directly by issuing one, by partnering with an issuer, or by providing the bank rails that support a stablecoin issuer. Those are not competing programs. They are two capabilities in the same payments stack.

Above both, the bank needs a settlement layer that can move a client between the two instruments, reconcile across networks, and do it with the same legal and operational finality it can deliver today on a wire. That is the orchestration work. It is also where most bank programs are still, at best, a couple years behind.

I really think the binary framing is a distraction. It lets people think the strategic question is which instrument to back. I believe the actual strategic question is whether you have a position on the settlement fabric, and whether you are helping to build it or letting someone else build it on top of your balance sheet?

The two tier system is not going away. It is gonna get rebuilt in tokens. Feels like the banks that understand that are hiring for it. The banks that are still debating about which one to pick are the banks that are going to have to settle for running one rail inside somebody else’s orchestration layer.

References

The two tier monetary system and BIS framing

• BIS 2025 Annual Economic Report, Chapter III — the next-generation monetary and financial system

• BIS 2025 Annual Economic Report — full PDF

• BIS press release — next-generation monetary system based on tokenised unified ledger (June 24, 2025)

• BIS Bulletin No. 73 — Stablecoins versus tokenised deposits: implications for the singleness of money

• CMS analysis — BIS on stablecoins, tokenised deposits, and singleness of money

• Federal Reserve — history of central bank reserves and the two-tier system

Stablecoin market data

• Stablecoin Insider — Q1 2026 stablecoin report ($316B market cap)

• Bitrue — Stablecoin trends May 2026: USDT vs USDC, market cap, GENIUS Act

• KuCoin — Stablecoin liquidity hits $320.6B milestone, May 2026

• DefiLlama — live stablecoin market cap, supply, and peg data

• Arkham Intelligence — how stablecoins reached a $300B market cap

• Analytics Insight — USDC captures 64% of adjusted stablecoin transaction volume (Mizuho data)

• Bloomberg — stablecoin transactions hit record $33 trillion in 2025, led by USDC

• Stablecoin Insider — how USDC overtook USDT in volume in 2026

GENIUS Act and US stablecoin regulation

• White House fact sheet — Trump signs GENIUS Act into law (July 18, 2025)

• Latham & Watkins — The GENIUS Act of 2025: stablecoin legislation adopted in the US

• Sidley Austin — The GENIUS Act: a framework for US stablecoin issuance

• OCC Bulletin 2026-3 — GENIUS Act regulations notice of proposed rulemaking

• Morgan Lewis — GENIUS Act implementation, key proposals, and what comes next

• World Economic Forum — how the GENIUS Act works and its global impact

JPMorgan Kinexys and JPMD

• J.P. Morgan — Introducing Kinexys (platform overview)

• J.P. Morgan — JPMD USD deposit token available for institutional clients

• CoinDesk — JPMorgan’s tokenized dollars are quietly rewiring how Wall Street moves money (Dec 2025)

• Ledger Insights — JPMD goes live on Base public blockchain

• Atomic Wallet — what JPMD is and how it works on Base

• Unchained — JPMD on Base and why big banks prefer deposit tokens over stablecoins

• CoinDesk — JPMorgan rebrands Onyx blockchain platform to Kinexys (Nov 2024)

• PYMNTS — Kinexys broadens FX reach with GBP blockchain rollout

HSBC tokenized deposit service

• HSBC — tokenized deposit service launches in the United States (April 13, 2026)

• Treasury Management International — HSBC launches new cross-border tokenised deposit service

• PYMNTS — HSBC makes “big bets” on blockchain with tokenization expansion (2025)

• PYMNTS — HSBC extends tokenized deposit service to US firms (2026)

• Cointelegraph — HSBC to launch tokenized deposits in US and UAE in 2026

• Khaleej Times — HSBC’s tokenised deposit move set to transform UAE banking by 2026

Citi, DBS, Standard Chartered, Deutsche Bank, and Partior

• Citi — Citi Token Services and 24/7 USD clearing for institutional clients

• CNBC — Citi debuts deposit and trade services on blockchains for institutional clients

• Banking Dive — Citi launches token service for institutional clients

• PYMNTS — Citi argues tokenized deposits belong at the core of finance

• Ledger Insights — Deutsche Bank joins Partior as euro and dollar settlement bank (May 2025)

• Citi — landmark fiat-to-digital currency payment settlement workflow trial with SWIFT

Cari Network (US regional bank tokenized deposit consortium)

• Bloomberg — US banks build tokenized deposit network to guard their turf (Feb 18, 2026)

• CoinDesk — US regional banks build tokenized deposit network on ZKsync to rival stablecoins

• Ledger Insights — Huntington, First Horizon, M&T prep to test Cari deposit token network

• Ledger Insights — Cari adopts ZKsync Prividium blockchain

• ZKsync — Cari Network case study: tokenized deposits for the US banking system

• Cari Network — team and leadership (Eugene Ludwig, former US Comptroller of the Currency)

• BusinessWire — Cari forms strategic partnership with Tassat to accelerate tokenized deposit network

• Banking Exchange — regional banks join forces to launch blockchain payment network

Project Agorá and the settlement fabric

• Project Agorá — BIS Innovation Hub project page

• BIS press release — Project Agorá launch (April 3, 2024)

• BIS — Project Agorá FAQ

• Ledger Insights — 41 institutions join BIS Project Agorá

• Ledger Insights — how Project Agorá aims to tokenize correspondent banking

• Ledger Insights — Citi, JPM, and others complete RSN tokenization settlement trials

• Yahoo Finance — SWIFT moves to blockchain settlement with live trials

• CCN — SWIFT’s shared ledger on Linea: 24/7 global payments architecture

The historical analogy of regulation Q and the money market fund era

• Federal Reserve History — Interest Rate Controls (Regulation Q)

• Federal Reserve History — Money Market Mutual Funds

• Wikipedia — Regulation Q (deposit interest caps and phase-out 1981-1986)

• Wikipedia — Money market fund

• ICI — History of Rule 2a-7 and the evolution of money market fund regulation

• Richmond Fed — Money market fund reform working paper

This matters right now because the US and Europe have made opposite bets on who should issue tokenized money and what legal protections should surround it. Europe is building a digital euro. The US has said, in about as many words, “absolutely not” and has instead written rules for private stablecoins. The stablecoin market crossed $300 billion in late 2025. Nine crypto native firms have received OCC national trust bank charters (most still conditional), with more applications in the pipeline. Both paths will reshape competition in banking. Neither is obviously right. And I think the structural risks in each approach are poorly understood even by most people in the industry.

The European approach is upgrade the plumbing, preserve the banks

The ECB is developing a retail digital euro. The preparation phase ran through October 2025, with enabling legislation expected in 2026, a pilot around mid 2027, and possible issuance by 2029. Separately, the ECB has launched wholesale CBDC projects (Pontes and Appia) for interbank settlement. On top of this infrastructure, banks would issue tokenized deposits, so your commercial bank money represented as tokens on a distributed ledger, with the same deposit insurance and regulation that applies today.

The EBA published a report on tokenized deposits in December 2024 that should worry anyone banking on this timeline. Out of 85 surveyed banks, one had a live tokenized deposit product in the EEA. One. About 17% expected to engage within two years. The rest were waiting.

The architecture preserves the two tier banking system while upgrading it to run on programmable infrastructure. European bankers keep their role, but they need to build. If they don’t offer tokenized deposits, licensed stablecoin issuers under MiCA will. Circle obtained an EMI license from France’s ACPR in July 2024, allowing it to issue USDC and EURC across the EU. It’s pretty clear that competition is already in the market.

The American approach is let the private sector figure it out

On January 23, 2025, Trump signed an executive order prohibiting federal agencies from developing or promoting a CBDC. The concern was surveillance. Congress broadly agreed. Instead, the US built rules for private stablecoins. The GENIUS Act became law on July 18, 2025, permitting three types of issuers. 1) subsidiaries of insured depository institutions, 2) OCC supervised non banks, and 3) state chartered issuers under $10 billion in circulation. Implementing regulations are due by July 2026.

Then came the charters. Since early 2025 the OCC has been processing a wave of national trust bank applications from crypto-native firms, and the approvals have been fast. Anchorage Digital, which received its conditional charter in 2021, is now fully operational as the only nationally chartered crypto bank. Erebor Bank received conditional approval in October 2025 and final charter approval in February 2026. On December 12, 2025, the OCC approved five more at once: Ripple and Circle (as First National Digital Currency Bank) as de novo charters, plus BitGo, Fidelity Digital Assets, and Paxos converting from state trust companies. Bridge (the Stripe subsidiary) got conditional approval in February 2026. Crypto.com followed shortly after.

These are trust bank charters, not full commercial bank licenses. The firms can’t take deposits, can’t access FDIC insurance, can’t borrow from the discount window. What they get is federal supervisory legitimacy under the OCC, preemption of state by state money transmitter licensing, and, because national banks are required to be Federal Reserve members, eligibility for Fed master accounts. The Bank Policy Institute, representing traditional banks, has argued that these novel charter institutions shouldn’t automatically qualify as “depository institutions” under the Federal Reserve Act. But the legal default favors them as nationally chartered banks.

Why convenience will win and what that means for deposits

There’s an old idea in monetary economics that bad money drives out good, people will hoard gold coins and spend debased ones. In a digital payments world I think the dynamic runs the other way. Consumers optimize for convenience. They’ll move to whatever system is cheapest and most frictionless and stop caring whether the money inside it is safe. If you think about PayPal, Venmo, M-PESA, Alipay etc, there are hundreds of millions of people already hold monetary IOUs from non bank companies with weak regulatory protections. Why? Well, because the payments work and nobody reads the fine print.

That’s really the dynamic the US has now turbocharged. The GENIUS Act creates a regulated stablecoin market where newly chartered trust banks will issue, custody, and settle tokenized dollars that compete directly with bank deposits for payments and programmable finance. If stablecoins offer faster and cheaper payments, and running on 24/7 blockchain rails, then we can expect some portion of deposits will migrate. The OCC charter wave means the firms capturing those flows won’t be startups with uncertain regulatory status. They’ll be federally supervised institutions with national charters.

In Europe, the architecture is explicitly designed to prevent this. The digital euro provides the settlement layer; banks provide the deposit layer. MiCA requires overcollateralization of stablecoins, with custody asset values exceeding outstanding token values. Banks keep issuing money. Stablecoins compete on the margin.

In the US, the structural protection for bank deposits doesn’t exist. Which means the strategic question for US banks isn’t whether stablecoins will compete with them. It’s really how much market share they’ll lose, and how fast.

What happens when a stablecoin issuer fails

Bank deposits survive bank failures. Deposit insurance covers the first $250,000. The Fed acts as lender of last resort. Prudential regulation limits risk-taking. This is the infrastructure that makes bank money reliable in a crisis.

Stablecoins, even GENIUS Act compliant stablecoins issued by OCC trust banks, have none of this. No FDIC insurance. No discount window. No lender of last resort. Reserve requirements and federal oversight, yes. But what happens in bankruptcy?

When a company enters bankruptcy, the automatic stay freezes everything. Creditors can’t withdraw. Under the pari passu rule, stablecoin holders get lumped in with every other unsecured creditor. The Celsius bankruptcy showed what this looks like: in January 2023 a court ruled that crypto in Celsius’s Earn accounts was property of the bankruptcy estate, not the depositors’. About $4.2 billion in accounts became unsecured claims. The court applied the logic of the 1848 English case Foley v. Hill, which holds that money deposited with a bank belongs to the bank.

Bankers might dismiss Celsius as a sketchy crypto lender. But the legal principle applies broadly. A GENIUS Act trust bank issuing stablecoins with full reserves could face the same automatic stay in bankruptcy. The GENIUS Act’s reserve and custody requirements may function as structural separation that keeps customer assets outside the estate, or they may not. That question hasn’t been tested in court. Japan offers a useful comparison: after Mt. Gox, Japan mandated strict asset segregation for crypto firms. When FTX collapsed in November 2022, Japanese customers got their money back in three months while US customers were still in line.

Whether the GENIUS Act’s protections are strong enough to produce a Japan like outcome or a Celsius like one is something we won’t know until there’s a failure. And with over $260 billion in USDC and USDT alone, the stakes when that test comes will be large.

The SVB problem, but multiplied across borders

In March 2023, Circle had about $3.3 billion in reserves at Silicon Valley Bank. When SVB failed, USDC briefly traded at $0.8774. The depeg reversed only because the FDIC covered all SVB deposits, including uninsured ones. The stablecoin was only as safe as the bank holding its reserves, and most USDC holders had no idea which bank that was.

This is the correspondent banking fragility at the heart of stablecoin architecture. It’s worth considering there’s a bit of a multi issuance problem. USDC is one brand but it’s issued by different legal entities in different jurisdictions, under MiCA in Europe and the GENIUS Act in the US. Which entity’s reserves back your specific tokens? If you need to redeem, who are you redeeming against?

The equivalence frameworks between MiCA and the GENIUS Act, the mechanisms for cross border regulatory recognition, are underdeveloped. For banks that custody stablecoins or lend against them as collateral, this is basically a credit risk problem dressed up as a technology question.

AML should be keeping compliance up at night

Chainalysis reported $154 billion in illicit crypto volume in 2025, with stablecoins accounting for 84% of it, up from 63% the prior year. The specific instrument both jurisdictions are building their regulatory frameworks around is also the preferred vehicle for illicit finance. Banks touching this ecosystem need blockchain analytics capabilities most of them haven’t invested in yet.

Two paths to Fed access

The OCC trust bank charters carry Fed access as part of the package. As nationally chartered banks, these institutions are required to be Federal Reserve members and are generally eligible for master accounts, giving them direct access to Fedwire. That’s not the skinny master account, that’s the front door.

The skinny master account is a separate pathway, designed for state chartered entities that don’t have an OCC charter. In October 2025, Fed Governor Christopher Waller proposed limited purpose accounts with settlement access but no discount window, no interest on reserves, and probable balance caps, restricted to firms with a state SPDI or similar charter. The Fed is targeting a broader Q4 2026 rollout.

The distinction matters because of what happened with Kraken and Custodia, two Wyoming SPDIs that went after the same thing and got opposite results. Custodia applied for a master account in 2020 and was denied by the Kansas City Fed in 2023, during a period when Tier 3 access (for eligible but federally uninsured institutions) was effectively unobtainable. The district court upheld the denial. The 10th Circuit affirmed in October 2025. Custodia is seeking en banc review.

Kraken Financial, also a Wyoming SPDI, applied in the same period but got its answer in a different political environment. On March 4, 2026, the Kansas City Fed approved a limited purpose master account for Kraken, making it the first crypto firm in history with direct Fedwire access. The approval is deliberately constrained: no interest, no emergency lending, one year initial term, and it serves as a pilot for the broader skinny account framework. The Fed classified Kraken as Tier 3, only the third institution at that tier ever approved.

So there are now two routes to Fed settlement for crypto native firms. OCC trust banks get it through membership. State chartered SPDIs can get it through the skinny account pathway that Kraken just proved works. Either way, these firms no longer depend on commercial banks for access to the payment system. That removes the correspondent banking vulnerability exposed in the SVB episode. It also removes a revenue stream for bank with the fees that correspondent banks earn for providing that access. For the largest custody and clearing banks, the competitive implications of a dozen newly chartered institutions with direct Fed access should be getting attention at the board level.

What’s still missing

A properly designed tokenized money system needs three things. First, a regulatory charter for payment issuers with genuine structural separation of customer funds and clear resolution procedures. Second, open access to central bank settlement. Third, governance: an institutional framework for how stablecoin dollars, tokenized deposits, and traditional bank money coexist as all three scale.

The US is making real progress on the first two. The GENIUS Act provides the charter; the OCC is filling it with institutions. OCC trust banks get Fed access through membership; state chartered SPDIs now have the Kraken precedent and the skinny account rollout targeting Q4 2026. Governance remains completely absent. Nobody is really coordinating how these parallel monetary systems will interoperate.

The EU has more of the architecture on paper. The digital euro provides settlement. MiCA provides the charter. The ECB provides governance. But with one live tokenized deposit and most banks waiting, the architecture is largely theoretical at this point.

The BIS’s Project Agora, with seven central banks and 40+ financial institutions, is testing tokenized commercial bank deposits settling against wholesale CBDC. It’s the closest thing to a complete working model. But it’s also a lab experiment.

The cost of financial intermediation in the US has been stuck at 1.5 to 2 percent for over a hundred years. Tokenized money is a bet that technology finally breaks that. The two roads the US and Europe are taking do not look like they are going to be converging anytime soon, and both involve regulatory path dependency: charters granted, infrastructure built, relationships locked in. The decisions being made in 2026 feel like they will be very expensive to reverse by 2030.

Sources

Awrey, Dan. Beyond Banks: The Future of Money. Princeton University Press, 2024.

Chainalysis 2026 Crypto Crime Report. Chainalysis, 2026.

European Banking Authority Report on Tokenised Deposits. EBA, December 2024.

Ferretti, Federico, et al. The Tokenized Economy. Giappichelli, 2026.

GENIUS Act — Congressional Research Service Overview. Signed into law July 18, 2025.

In re Celsius Network LLC, No. 22-10964 (Bankr. S.D.N.Y. 2023).

Custodia Bank v. Federal Reserve Board of Governors, No. 24-8024 (10th Cir. 2025).

Federal Reserve Governor Waller: “Skinny” Master Account Proposal. Mayer Brown, October 2025.

Federal Reserve targets Q4 2026 for skinny master account rollout. Troutman Pepper, December 2025.

Kraken becomes first digital asset bank to receive a Federal Reserve master account. Kraken Financial, March 4, 2026.

Kraken receives Fed master account, in a first for crypto. Banking Dive, March 2026.

OCC Announces Conditional Approvals for Five National Trust Bank Charter Applications. OCC, December 12, 2025.

Erebor Bank approved for conditional federal bank charter. CoinDesk, October 2025.

Crypto.com receives conditional OCC national trust bank charter. Banking Dive, 2026.

Stablecoin market tops $317 billion. MEXC, January 2026.

Philippon, Thomas. “Has the US Finance Industry Become Less Efficient?” American Economic Review 105, no. 4 (2015): 1408–1438.

Regulation (EU) 2023/1114 — Markets in Crypto-Assets (MiCA).

Trump, Donald J. “Strengthening American Leadership in Digital Financial Technology.” Executive Order, January 23, 2025.

The instruments are arriving at industrial scale. The GENIUS Act, signed in July 2025, created the first federal framework for payment stablecoin issuers. The OCC published proposed implementing rules in February. The OCC conditionally approved national trust bank charters for Circle, Paxos, BitGo, Ripple, and Fidelity Digital Assets in December. A consortium of ten global banks, Citi, Deutsche Bank, Goldman, UBS, BofA, MUFG, Barclays, TD, Santander, and BNP, is exploring jointly issued stablecoins pegged to G7 currencies.

And it’s not just stablecoins. Treasury funds passed $5 billion in market value in March; BlackRock’s BUIDL alone is over $2.8 billion. Franklin Templeton’s Benji crossed $1 billion. Citi Token Services and Partior are running tokenized deposits in production for institutional clients. In April, Securitize and Computershare opened the path for US-listed equities to be issued in tokenized form, sitting alongside the certificates Computershare already keeps for more than half the S&P 500. Tokenized real world asset value crossed $26 billion in March, four times the year before. The wallet that catches a stablecoin is the same wallet that catches all of this. Stablecoins are the leading edge, they are the tip of the spear as I’m fond of saying.

Sound money is the prerequisite, and you need the instruments before you need anything else.

But most banks are not going to be issuers. They are going to be receivers, and the vast majority have no way to receive a stablecoin when one arrives. At a panel at the Chicago Fed last October, a room full of senior bankers was asked how many had ever used a crypto wallet. Not a single hand went up. These are the people running the institutions where the stablecoins are going to land.

The issuance problem is being solved, by JPMorgan, SoFi, Circle, Tether, and a growing list of bank consortia. How those instruments actually reach and move through the other 3,900 banks in the US, the hundreds of banks in Europe, the thousands across Asia and Latin America, that part is still missing.

What credit cards already taught us

I’ve been thinking about how stablecoins are replaying the early credit card market. In the early 1960s, credit cards were American, dollar denominated, and concentrated among a handful of issuers. BankAmericard was a Bank of America product. Diners Club, American Express, and Carte Blanche were each single firms. You could have made every argument about credit cards in 1965 that people make about stablecoins today: it will stay an oligopoly, it will stay dollar dominated, network effects will entrench the early movers.

The prediction was right about the network layer and wrong about everything underneath it. Visa and Mastercard remain a duopoly. Visa has 4.9 billion payment credentials in circulation as of mid-2025, Mastercard has more than 3 billion. Underneath those two networks, thousands of financial institutions issue cards across every currency on earth.

What changed was where the concentration sat. Bank of America launched BankAmericard in Fresno, California in 1958 and began licensing it to other banks in 1966. A consortium of California banks, Wells Fargo, Crocker, United California Bank, and Bank of California, formed the Interbank Card Association the same year, which became Mastercard. In 1970, Bank of America gave up direct control of BankAmericard, transferring it to a cooperative owned by the issuing banks (renamed Visa in 1976). The structural move was to separate the act of issuing from the act of accepting. The networks consolidated. The issuers fragmented. When you walk into a department store in Tokyo and pay with an Indonesian debit card, the merchant doesn’t care about the issuer. The merchant cares about the network mark on the card. That’s where the trust sits. The acceptance network made the issuer interchangeable, and making the issuer interchangeable is what made thousands of issuers possible.

Stablecoins have no equivalent. The GENIUS Act regulates the issuer. The market argues over which token will win. Nobody has built the acceptance layer that makes the identity of the issuer irrelevant to the institution receiving the payment.

Today the right to redeem a stablecoin at par sits with a tiny set of authorized participants. Circle has 521 of them for USDC, Tether has 6 for USDT. Everyone else has to find a secondary market or a willing intermediary. That’s the acceptance gap, expressed in numbers.

The wallet is the acceptance layer

So what should a bank that isn’t JPMorgan or SoFi actually do?

Get a wallet. An address on one or more public blockchains, with the bank custodying the keys and the customer seeing the balance through familiar interfaces. The pragmatic move at this point is to treat it as a sidecar architecture, a parallel ledger that connects to the existing core through adapters. A multi chain wallet sits next to the bank’s legacy systems and lets it participate in tokenized money without forcing a full core replacement. It requires only the recognition that tokens on chains are going to be part of the financial plumbing, and that the institution needs a bridge between its existing core and that world. Getting connected matters more than being right about which chain or token wins. The financial outlay is modest compared to building a new payment rail or launching a stablecoin program, and the bank ends up covered against most of the plausible futures.

A bank joining a multi chain wallet network in 2026 is doing what a bank joining Visa in 1970 did. You didn’t need to be right about which cards would dominate. You needed to be inside the network when the volume came.

Barclays seems to have understood this. In January 2026, the bank invested in Ubyx, a clearing system for digital money designed to turn stablecoins and tokenized deposits into cash for receiving institutions. The framing from Barclays’ head of digital assets was the interoperability imperative. Infrastructure without interoperability is just an expensive silo. The right question is whether the institution can receive and process whatever arrives.

The ATM network economics

There’s a commercial case here that goes beyond hedging. Every foreign stablecoin that arrives at a bank’s wallet is an FX conversion opportunity. The bank catches the dollar stablecoin, converts it to local currency for its customer, and earns the spread.

The Visa and Mastercard networks didn’t just solve card acceptance at merchants. They also rewired global ATM economics. By the 1990s, every retail bank on earth had connected its ATMs to Visa Plus or Mastercard Cirrus. The reason was FX. Every foreign card that walked up to a local ATM produced an FX conversion the local bank captured, plus a network interchange fee. A US tourist pulling €200 out of a BBVA machine in Madrid generated FX margin and interchange that BBVA captured without underwriting the card or knowing anything about the issuer. The bank just had to be on the network.

That’s the wallet trade. The US is pumping dollar denominated stablecoins into every market on the planet. A bank in Singapore that catches a USDC transfer for its corporate client and converts it to Singapore dollars earns FX revenue on a flow that would previously have moved through correspondent banking rails where the margin was already compressed. Cross border payment flows exceeded $190 trillion in 2023 and are heading toward $290 trillion by 2030. Even a small fraction of that moving to stablecoin rails is real money for the institutions that can catch it.

The wallet pays for itself in FX revenue. Everything else is upside.

Receive before you issue

The instinct in banking is to own the liability, to be the issuer. That instinct is sound. Banks are balance sheets, and issuing is what balance sheets do. But for the roughly 3,900 US banks that aren’t JPMorgan, I think the right first move is to receive rather than issue.

A bank that issues a stablecoin today faces an immediate distribution problem. Where can the coin be accepted? Who can redeem it? What happens when it crosses a border? Without a mutualized acceptance network, the issuing bank has to build bilateral relationships with every receiving institution. A bank that implements a wallet and starts receiving whatever stablecoins arrive learns the operational reality first: custody, compliance screening, conversion, settlement. It builds the muscle. And it earns FX from day one. Issuance can come later, once the acceptance infrastructure exists to support it.

There's a structural reason the receiving bank wins. Stablecoins move the asset; they don't move the risk. Whoever catches the inbound stablecoin and provides the local currency deposit holds the redemption risk and provides regulated deposit insurance to the holder. Tokenization shifts which institution performs that function. The function remains. That's a banking function and it always has been.

There’s a deposit flight dimension too. The 820 million active crypto wallets that existed in 2025 are mostly unhosted, sitting outside the regulated financial system. If a bank’s customers want to hold stablecoins and the bank doesn’t offer a wallet, those customers will use MetaMask or Phantom or Coinbase. The deposits leave because the bank offered no alternative. The wallet is the minimum viable move to keep customers inside the perimeter.

Central bankers see the same thing from a different angle. If you’re the governor of Bank Negara Malaysia and foreign stablecoins are entering your economy, where do you want them to land? On unhosted wallets you can’t see, or on wallets provided by your regulated banks, where the flows are visible and conversion to local currency is automatic? Every central bank running that calculus arrives at the same answer.

Banks don’t need to pick a chain

Every ingredient already exists. The chains work, the instruments are being issued at scale, and the regulatory frameworks are forming. What’s missing is coordination.

The industry’s own go to market is making it worse. Every chain walks into a bank and says my chain is the best. Every issuer says accept my coin. Each pitch forces the bank to pick a winner. Banks hate picking winners in technology categories that are still moving. A chain evaluation can take three years inside a large institution. Multiply that by fifteen chains pitching fifteen different stories and the bank ends up doing nothing.

The better approach is to stop asking banks to choose and start asking them to connect. A multi chain wallet lets the competition between tokens and chains play out after the bank is connected, not before. Visa understood this in the 1960s. The smart move for a bank wasn’t to build its own proprietary card that only worked at merchants it had signed individually. The smart move was to join the network. The banks that became co-owners of Visa and Mastercard before the IPOs captured enormous value because they chose the collective infrastructure over the proprietary instrument.

The open question is whether the new tokenization consortia reach critical mass before fragmenting. Cari Network, Project Keystone, the nine-bank European group, the ten-bank G7 consortium are all placing bets, and not all of them will clear. The wallet move hedges that question. A bank with a multi chain wallet doesn’t need to predict which consortium wins. It just needs to be reachable from whichever does.

I think the same pattern is forming now. The institutions that move early to build acceptance infrastructure will own a piece of the plumbing through which trillions of dollars eventually flow. The ones still running chain evaluations will find the network was built around them while they were still in committee.

The instruments are here. The acceptance layer is the next move. The banks that get a wallet will be well positioned to catch what comes next.

References

Legislation and regulatory sources

• GENIUS Act (S.1582), signed July 18, 2025

• OCC proposed rulemaking implementing GENIUS Act, issued February 25, 2026

• OCC conditionally approves five national trust bank charter applications — Circle, Paxos, BitGo, Ripple, Fidelity Digital Assets (December 12, 2025)

Market data and institutional activity

• Stablecoin transactions rose to record $33 trillion in 2025, up 72% YoY (Artemis Analytics via Bloomberg)

• Stablecoins reach $321B market cap as of May 3, 2026 (CoinSpectator); Stablecoin Market Cap Live Data (DefiLlama)

• Cross-border payment flows and projections — exceeded $190 trillion in 2023, projected $290 trillion by 2030 (Visa)

• Kinexys 2026 Milestones: Fund Flow, JPM Coin on Base, Leadership and More — $3 trillion cumulative, $5 billion daily average

• JPMorgan launches JPM Coin (JPMD) on Base for institutional clients

• SoFi launches SoFiUSD stablecoin (December 2025)

• SoFi and Mastercard partner to enable SoFiUSD settlement across Mastercard’s global network (March 3, 2026)

• Fidelity launches FIDD stablecoin on Ethereum (February 4, 2026)

• Nine European banks building MiCA-compliant euro stablecoin — ING, UniCredit, KBC, Danske, DekaBank, Banca Sella, SEB, CaixaBank, Raiffeisen Bank International (September 25, 2025)

• UBS, PostFinance, Sygnum, Raiffeisen, ZKB, BCV launch CHF stablecoin sandbox (April 8, 2026)

• Ten global banks explore G7 stablecoin consortium — BNP Paribas, Santander, BofA, Barclays, Citi, Deutsche Bank, Goldman, MUFG, TD, UBS (October 2025)

• Barclays invests in Ubyx to advance digital money connectivity (January 7, 2026)

Tokenized assets beyond stablecoins

• Tokenized Real-World Asset Value Jumps Fourfold to $26 Billion (PYMNTS, March 2026)

• BlackRock BUIDL Tokenized Treasury Fund — over $2.8B AUM (Securitize)

• Securitize and Computershare announce agreement to enable tokenized shares for U.S. issuers (April 29, 2026)

• Securitize, Computershare open path for $70 trillion in U.S. stocks to move onchain (CoinDesk)

Card network data

• Visa Fiscal 2025 Annual Report — 4.9 billion payment credentials in circulation

• Mastercard cards in circulation — over 3 billion active cards globally

• Visa Inc. Wikipedia — BankAmericard 1958, NBI cooperative 1970, renamed Visa 1976

• Mastercard Wikipedia — Interbank Card Association formed 1966 by Wells Fargo, Crocker, United California Bank, and Bank of California

Bullish to acquire Equiniti from Siris in $4.2 billion transaction, creating the global transfer agent for tokenized securities

Bullish has agreed to acquire Equiniti, a global transfer agent processing $500B annually, for $4.2 billion — combining its tokenization stack with legacy securities registry infrastructure. The deal is one of the largest crypto-to-TradFi acquisitions on record and signals that tokenized securities will require traditional settlement plumbing to scale.

https://www.bullish.com/us/news-insights/bullish-to-acquire-equiniti-from-siris-in-4-2-billion-transaction-creating-the-global-transfer-agent-for-tokenized-securities

State Street Investment Management and Galaxy Digital Bring Cash Management Onchain

State Street Investment Management and Galaxy Digital have launched the State Street Galaxy Onchain Liquidity Sweep Fund on Solana, enabling institutional investors to automatically sweep idle stablecoins into a yield-bearing tokenized money market vehicle. The product represents a major traditional asset manager bringing cash management fully on-chain for the first time.

https://www.businesswire.com/news/home/20260505800898/en/State-Street-Investment-Management-and-Galaxy-Digital-Bring-Cash-Management-Onchain

SoFi to launch its stablecoin on Solana, citing speed and cost

SoFi Bank, a nationally chartered U.S. bank, is launching SoFiUSD — a fully reserved dollar stablecoin on Solana — marking one of the first bank-issued stablecoins to enter the market. The move illustrates how chartered banks are moving beyond observation into direct stablecoin issuance.

https://www.theblock.co/post/400098/sofi-to-launch-its-stablecoin-on-solana-citing-speed-and-cost

Western Union launches USDPT stablecoin issued by Anchorage on Solana

Western Union has launched USDPT, its Solana-based stablecoin issued by Anchorage Digital and powered by Fireblocks infrastructure, targeting cross-border agent settlements across its global network. The launch by a 175-year-old payments institution signals that incumbent remittance operators view stablecoin rails as a strategic necessity, not a novelty.

https://www.theblock.co/post/399890/western-union-launches-usdpt-stablecoin-anchorage-solana

FINRA green lights Securitize for tokenized IPO underwriting and custody

FINRA has approved Securitize to conduct tokenized IPO underwriting, custody, and atomic settlement — making it the first broker-dealer cleared for the full tokenized securities stack. Paired with Jump Trading as market maker and Jupiter for access, Securitize is assembling a complete regulated trading venue for on-chain equities.

https://www.theblock.co/post/399895/finra-green-lights-securitize-for-tokenized-ipo-underwriting-and-custody

Regulation & Policy

Negotiators brush off bank concerns with stablecoin-yield compromise

Senators Tillis and Alsobrooks brushed off bank industry objections to the CLARITY Act’s stablecoin-yield compromise, saying they ‘agree to disagree’ with bank lobbyists. The standoff — with banking associations warning the provision risks deposit flight while Senate negotiators hold firm — sets the terms for a pivotal markup expected in May.

https://www.americanbanker.com/news/negotiators-brush-off-bank-concerns-with-stablecoin-yield-compromise

DTCC sets October launch for tokenized securities platform in Wall Street blockchain push

The DTCC has confirmed a July pilot and October full launch for its tokenized securities platform, with more than 50 firms from both TradFi and digital asset sectors joining the industry working group. With $114 trillion in custodied assets under its umbrella, DTCC’s timeline transforms on-chain securities settlement from pilot into scheduled market infrastructure.

https://www.coindesk.com/business/2026/05/04/wall-street-giant-dtcc-plans-tokenized-securities-platform-with-july-pilot-october-launch

Brazil imposes partial ban on stablecoins, crypto for cross border payments and FX

Brazil’s central bank has banned stablecoins and crypto from regulated cross-border payment and FX settlement channels, a significant policy restriction that runs counter to the trend of stablecoin adoption in cross-border corridors. The move is a meaningful data point for regulators and banks assessing sovereign risk in digital payment infrastructure.

https://www.ledgerinsights.com/brazil-imposes-partial-ban-on-stablecoins-crypto-for-cross-border-payments-and-fx/

Research & Analysis

The impact of stablecoins on the international monetary and financial system

A new BIS publication examines how widespread stablecoin adoption could reshape the international monetary and financial system, with particular concern for emerging market and developing economies. Using the framework of international currency functions, the paper argues stablecoins are most likely to substitute for foreign cash holdings — with significant implications for dollar dominance and EMDE monetary sovereignty.

https://www.bis.org/publ/bppdf/bispap170.htm

FEDS Note: Banks in the Age of Stablecoins: Lessons from Their Historical Responses to Financial Innovations

A Federal Reserve FEDS Note draws on banking history to assess how stablecoins may affect bank funding and deposit structures, as stablecoin market cap moves from the periphery to the center of U.S. policy debate. The paper offers regulators and bank executives a historically grounded framework for assessing the deposit-substitution risk that now dominates the CLARITY Act debate.

https://www.federalreserve.gov/econres/notes/feds-notes/banks-in-the-age-of-stablecoins-lessons-from-their-historical-responses-to-financial-innovations-20260501.html

Tokenized Money

Chiara Scotti: Digital money and the architecture of trust

Bank of Italy Deputy Governor Chiara Scotti, speaking at a joint Bank of Italy/ECB workshop on digital assets and monetary policy transmission, addressed the architecture of trust required for digital money. Her remarks, alongside a related Bank of Italy call to explore tokenized SEPA payments, signal growing European central bank engagement with tokenized payment rails at the infrastructure level.

https://www.bis.org/review/r260505d.htm

I suspect what the market has begun to notice is that the Big Three are sitting on platforms built between 1977 and 1989, before the world wide web was invented, and now money is becoming programmable. JPMorgan has cleared $2 trillion in notional value through Kinexys. Citi runs Token Services across its own branches. Partior, the bank owned consortium platform, has been doing atomic cross bank settlement of tokenized deposits in multiple currencies since 2021. The GENIUS Act, signed in July 2025 and taking effect in January 2027, gave payment stablecoins their own federal regulatory category. None of the dominant US cores were built for any of this. Most legacy cores were not designed to represent tokenized instruments as first class objects, with token specific lifecycle states, wallet ownership, rail aware settlement, programmability, and real-time control logic.

What stands out to me more than anything is this is the last large enterprise software category without a serious AI native challenger at scale, and that is surely going to change. But I doubt AI alone is the forcing function. Programmable money creates the architectural gap. AI may simply change the economics of closing it.

The cloud shift that never quite happened

The Big Three platforms in production today were built between the late 1970s and the late 1980s. Fiserv Premier launched in 1978. FIS Systematics in 1977, FIS IBS in 1980. Jack Henry SilverLake came in 1988. They were the wave that brought banks off the central mainframe and onto IBM mid range computing, and they have been the ledger of record for most US community and regional banks ever since.

Those platforms have run for forty plus years and absorbed every wave of new technology since. They absorbed Y2K, online banking, the 2008 crisis, and the early cloud era as integration layers rather than as triggers for replacement. The Big Three moved hosting models into private cloud, then started talking about AWS and Azure, then acquired or built next generation platforms: Finxact at Fiserv, Modern Banking Platform at FIS, the cloud native deposit core Jack Henry has been building since 2022. Challengers have appeared. Thought Machine won real reference customers including some GSIBs, but none of them broke through to scaled deployment across US community and regional banks. Temenos has won a handful of US deals after probably fifteen years of trying.

Tokenization is a different order of problem. Every previous wave changed how customers interacted with the ledger. Online banking added a web channel. Mobile added a phone channel. FedNow accelerated when the ledger had to update. The ledger itself stayed the same: a row in a database, denominated in dollars, posted overnight in batch. Tokenized money changes what the ledger represents. A tokenized deposit is not just a faster account entry. It is a tokenized representation of commercial bank money, recorded on ledger infrastructure that can support transfer, settlement, programmability, and audit in ways legacy account systems were not designed to handle. It clears in seconds against external rails rather than overnight in batch, carries conditional execution logic the legacy core cannot interpret, and moves in unit values legacy COBOL packed decimal fields cannot natively express. Adding a web channel to a 1980s core is an integration project. Making a 1980s core understand tokenized deposits is basically a rebuild.

The reason core banking has absorbed every previous wave without losing its franchise is that the moat was never really the product. The moat was everything around it. A typical US community bank core sits behind 30 to 60 vendor integrations, none of which migrate cleanly. Big Three contracts run seven years with termination fees that can run into eight figures. Working with Premier or Horizon requires platform specific knowledge that has no market outside it. The bank technology consultancies have hundreds of millions of dollars of practice revenue tied to Big Three migrations, and the analysts who cover the category are funded in part by the same vendors.

The moat works for the customer too. Many bankers have scare tissue since roughly only 30% of full core migrations have succeeded over the past decade. A regional bank CIO who renewed Premier or IBS in 2023 made a defensible call. Stable operations was the right answer for the conditions of the time. However, the conditions of the time are now changing.

What the Big Three just admitted

The clearest evidence that the conditions are changing is that the incumbents are themselves announcing it. Each of the Big Three has now shipped, or is shipping, a program that signals its existing platforms cannot do what banks need them to do over the next decade.

Start with Fiserv. In January 2026, Fiserv announced a strategic collaboration with Microsoft. Microsoft 365 Copilot rolls out across the Fiserv workforce. Microsoft Foundry on Azure becomes the platform for embedded AI, with stated targets across fraud detection, customer service, and operational efficiency. Fiserv has run more than 100 billion tokens through Foundry already, and 8,000 of its engineers are using GitHub Copilot. None of that is fake. Also none of it is a description of agents running production workloads inside customer cores. It is a platform partnership and an internal productivity push, with the client facing AI workloads on the future deliverables side of the slide.

FIS is a little more interesting. FIS has run two tokenization related plays in 2026, and they really tell you everything about the architectural problem. The first, in January, was an agentic commerce offering with Visa and Mastercard, tied to FIS’s $13.5 billion acquisition of Global Payments’ Issuer Solutions business. The pitch was that issuing banks can stay top of wallet when AI agents start initiating transactions on customers’ behalf. Real product, but card network side, and orthogonal to the core ledger.

The second came on April 29, when FIS announced Lyriq, a platform purpose built for regulated banks to issue, manage, and settle tokenized deposits, stablecoins, and CBDCs while keeping the deposits on the bank’s own balance sheet. The next day, FIS announced Project Keystone, the first major Lyriq deployment: a bank administered network with five super regional founding members (Citizens, Fifth Third, Huntington, KeyBank, M&T) plus an unnamed sixth. Lyriq feels like the most consequential thing FIS has done in years, and it is also a sidecar. The single most important sentence in the Lyriq announcement is the one that says

“works with existing core banking systems, regardless of technology provider.”

To me the architectural signal is clear that the fastest path to tokenized deposits is not a full replacement of the existing core. It is a parallel digital money layer that works across cores. That may be commercially smart, but it also tells you where the legacy architecture ends. You have to smile at how the architecture admission is the platform itself.

Jack Henry have perhaps been the most disciplined of the three. Shanon McLachlan, the COO, described their recent work as “below the waterline,” foundational engineering rather than visible AI features. He also flagged a fact that’ll make every Big Three customer take a pause. Most legacy core systems use COBOL packed decimal fields fixed at two decimal places. The Jack Henry deposit core was rebuilt with nine decimal precision, which lets it natively express USDC and tokens that move in finer denominations. The bigger issue is what sits underneath the decimal point. Legacy cores treat balances as dollar denominated rows. They have no concept of a token as a distinct data type. JPMorgan, when it built Kinexys, did not extend its existing core. It built a new ledger, I suspect because the old one could not represent the instruments it needed to issue.

There’s a consistent pattern here across all three. The procurement framework gets built first, because both sides need it. So the vendor needs AI revenue for investors, the customer needs AI spend for the board. The actual deployment of agents into core workflows comes later, and “later” is not really a defined date. The Big Three’s AI work is not fake. Jack Henry’s foundational engineering in particular feels real. But bolting AI on top of an engine designed for nightly batch posting does not make it AI native. And building a sidecar around a core that cannot handle tokenization does not make the core able to handle tokenization. It just kicks the can down the road.

Why the gap is now urgent

I don’t think the urgency is that every community bank will suddenly lose retail deposits to stablecoins. To me, the first order threat is commercial operating balances, treasury flows, escrow balances, settlement accounts, liquidity sensitive corporate relationships, and tokenized asset settlement activity moving toward institutions that can operate in programmable settlement environments.

For the last two decades of my career, the answer to “when will core banking get rebuilt?” was always “soon.” Soon has kept slipping, but I think this time is structurally different, for three reasons.

First, programmable money is no longer hypothetical, and it is no longer one thing. Tokenized deposits, onchain claims against an FDIC insured bank balance, are running at JPMorgan, Citi, and Partior. Payment stablecoins, bearer instruments backed 1:1 by reserves, are running at Circle (USDC, $78 billion), Tether, Paxos, and Ripple. Different instruments with different legal characters, but both rely on a regulated bank somewhere underneath, either as the issuer of the tokenized deposit or as the holder of the stablecoin reserves. The GENIUS Act requires every payment stablecoin issuer to operate under either a bank charter, a federal trust charter, or an approved state regime. In December 2025, the OCC conditionally approved national trust bank charters for Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets. Coinbase and Stripe’s Bridge are pending. The stablecoin issuers are not bypassing the banking perimeter. They are entering it.

Yes today’s volume is still small. Fewer than 5% of corporate treasurers reported investing in digital assets in 2025. But Tradeweb’s 2026 corporate treasurer survey found 25% moderately to very interested in tokenized money market funds, 19% in stablecoins. McKinsey’s base case puts tokenized market cap at $2 trillion by 2030. A regional bank with $50 billion in deposits that loses 2% of its corporate balance over a five year window is staring at a billion dollar deposit migration. This is my back of envelope sizing of the forcing function, and I think the trajectory is only going one way.

Second, the Big Three have telegraphed that the next migration cycle is open. Once Fiserv, FIS, and Jack Henry have all said publicly, in different ways, that their existing cores need to be augmented, replaced, or sidecar’ed, the customer’s question changes. It is no longer “do I migrate?” It is “to what?” That question has been closed since 1989. It is open now in a way it has not been since the late 1970s.

Third, the tools to actually rebuild this now exist. Tessera has compressed SAP S/4HANA migrations that historically ran $250 million and three years into months. DataMigration.ai took an 18 month bank data migration and shipped it in four. Neither is a full stack core banking replacement, and no question core banking is harder than ERP, harder than data migration, harder than enterprise software broadly. But AI has demonstrably collapsed the cost and timeline of analogous enterprise modernization work in the last two years, and my bet is that the same pattern will transfer to banking. The proof point of an AI native Tier 2 bank core in production is still ahead, not behind. A serious challenger has to deliver one to make the rest of this real.

What the new core has to be

So in my mind, the AI native US core banking platform of 2030 is going to need five things. I don’t believe any are particularly speculative in isolation. JPMorgan has assembled the closest working version inside its own walls. Building it as a product the rest of the industry can buy is a big venture opportunity.

The first is a programmable balance sheet. By that I mean a ledger that represents tokenized instruments as a first class data type, can execute conditional settlement logic at the core layer, and clears coherently across two distinct kinds of external rail: real-time payment networks like FedNow and RTP on one side, programmable chains like Base, Ethereum, Solana, and Canton on the other. JPMorgan has built this for internal flows on Kinexys. Partior has built it for cross bank settlement among consortium members. What is not yet solved at production scale is atomic settlement between an arbitrary bank’s deposit ledger and a public chain without a trusted intermediary. The current options, HTLCs, trusted bridges, notary schemes, cross-chain protocols like Chainlink CCIP, all have tradeoffs. The institutional alternative is a unified ledger model, which is what the BIS is exploring with Project Agorá. Whichever architecture wins, the bank with a programmable balance sheet becomes a settlement endpoint for the tokenized economy. The bank without one accepts being routed around as the price of the existing architecture.

The second is a real-time evented ledger. The deposit ledger has to post in real time, not in nightly batch. Every state change is an event with a stable schema, durable history, and reversibility. This is what makes everything else possible. Programmable money does not work in batch, intraday liquidity is invisible without continuous balance visibility, and agents cannot react to a ledger that updates once a night. Today, most US bank cores simulate real-time on top of batch through caching layers and shadow ledgers, which is a solved problem until it isn’t, at which point reconciliation breaks publicly. Rebuilding the ledger as event-sourced from the ground up is the foundation underneath the other four properties.

The third is agent configurable operations. Big Three implementations cost what they cost because the work is fragmented across specialists in compliance, payments, deposits, lending, and reporting, sequenced by a program management office that bills hourly. Coding agents can collapse that fragmentation. Agents can ingest a bank’s tenant configuration, reconstruct the rules in plain English, reconcile against integration feeds, and generate a configuration draft in days rather than quarters. The same pattern works for ongoing operations: changing a comp rule, adding a new product, reconfiguring a workflow.

The fourth is a bank owned data layer. The bank’s own data, accessible directly by the bank’s own agents, through a real-time event stream and APIs that are not gated behind separate purchase agreements or token pools. The current architecture treats the customer as a tenant whose data the vendor controls, which made sense when integration was expensive and direct database access was a security risk. It does not make sense in a world where the bank wants its own agents to operate against its own customer data, and where its corporate clients want their agents to settle programmable transactions against the bank’s ledger. The bank owns the data, the vendor operates the platform, and the architecture has to distinguish them.

The fifth is agent grade controls. As banks deploy agents across compliance, operations, treasury, and customer service, "agent" becomes a first class principal type alongside human roles. A KYC agent should see customer onboarding data, not the trading book. A treasury agent should see intraday positions, not employee payroll. The technical pattern, scoped tokens with auditable trails, is an extension of existing IAM rather than a new category, but the data model has to be designed for it from the start. The same control plane has to handle the regulatory side. The compliance surface around banking, BSA/AML, OFAC, fair lending, CRA, the EU AI Act and MiCA for institutions with European operations, plus the new GENIUS Act layer for payment stablecoins, is expanding faster than most compliance team can track manually. An AI native architecture pulls regulatory monitoring into the core release cycle, with an agent that flags what needs to change and routes the update through human approval. The same stack, the same permissioning, one audit trail across the whole system. Difficult to retrofit into a platform built around quarterly release cycles, and natural to build into one designed for continuous deployment.

How do we get there, and why this is different

I think the entry point matters more than the endpoint. The right wedge is probably the one Capital One ran on payments infrastructure. Do not fight the incumbent renewal, rather sell into the adjacent budgets that are not locked. A bank’s core contract is typically locked for seven years, but its real-time payments program, FedNow integration budget, compliance technology spend, and data and analytics budget are not. A scoped project that delivers FedNow native settlement, AI driven compliance monitoring, or real-time GL reconciliation across the existing core can be sold cleanly into one of those budgets. By the time the core renewal opens, the challenger is already inside the bank, integrated with the existing core, and delivering value the CIO can point to. The question stops being “rip and replace your core.” It becomes “expand what is already working into the renewal we were going to negotiate anyway.”

The Big Three are not going to sit still. I expect aggressive bundling, with the core renewal packaged with payments processing, debit network economics, BSA/AML, and digital banking. I expect to see steep multi year discounts on renewals that happen to land in the middle of a challenger’s evaluation. I expect some FUD from the analyst firms and consulting partners with nine figure Big Three practices to protect. Expect contractual friction on data portability when a bank tries to extract its own tenant. None of those moves address the underlying architectural problem, but any one of them can easily slow a design partner deal by a quarter or more.

All of this is why the core is so different from any other software replacement. The core is a regulated balance sheet system. A core banking outage is not a productivity problem, it is a 24 hour news cycle and a regulatory examination. Stability beat modernity, and stability is what the Big Three sold. I think now stability requires modernity. CIOs who renewed for seven years in 2023 are sitting on contracts that expire in 2030, and between now and then their bank has to support real-time payments, programmable money, and AI in production. The architecture they renewed onto cannot do those things, and the vendor’s answer is a consolidation program that pushes them onto the next generation platform anyway.

The sidecar approach definitely buys time, but it does not buy architecture. Banks already run multiple specialty cores in parallel for mortgage servicing, wealth, and treasury, so adding a tokenization stack is not architecturally novel. What makes the tokenization sidecar different is that, unlike mortgage servicing, the deposits being moved through it are the same deposits the core ledger holds. Reconciliation between the two systems remains an operational burden. Intraday liquidity management still requires the core to participate, because the deposit balance lives in the core. As tokenized volume scales, the sidecar becomes a parallel system of record, and the bank ends up running two cores instead of one.

Project Keystone has a second problem that bank consortium models have run into repeatedly. The pattern is not necessarily that consortia always fail, but it’s that they struggle when value depends on broad counterparty adoption before any single participant gets enough standalone utility. Closed networks need every counterparty to join before they reach critical mass, and the previous decade is littered with bank consortium blockchain initiatives that failed to clear that bar: Marco Polo, We.Trade, Vakt, Komgo, Contour, B3i. Partior is the one that worked, and it took five years and a JPMorgan/DBS/Standard Chartered consortium to get there. Five super regional banks plus an unnamed sixth is a real start, but it’s not yet a network. The treasurer who needs to settle a tokenized payment between a Project Keystone bank and a non-Keystone counterparty has to fall back to dollar rails or use a stablecoin issuer with broader reach. The bank's tokenization capability fails to compete for that transaction.

In a community bank somewhere right now, an operations analyst is reconciling a discrepancy between the FedNow settlement file and the overnight GL post by hand, in a spreadsheet. In another bank, a relationship manager is explaining to a corporate client that the bank cannot settle the client's payment in tokenized form. The client routes the payment through their JPMorgan account instead, the one they opened for exactly this kind of thing. That conversation is going to happen more and more every quarter.

Someone is going to build the system that replaces both these pieces of work, and the bank that buys it first will spend the next decade taking corporate relationships from the banks that didn't.

References

Core banking market structure and concentration

• Federal Reserve Bank of Kansas City (April 2024). Market Structure of Core Banking Services Providers.

• Engage fi (2025). Core Banking Modernization Part 2: The Big Three.

• SDK.finance (April 2026). Best Core Banking Software Providers 2026.

Big Three modernization programs

• Everest Group (January 2026). The Great Core Banking Shakeup.

• CCG Catalyst (December 2025). Earnings Roundup: Fiserv, FIS, and Jack Henry.

• Finopotamus (April 2026). GAC 2026: Core Conversations with Fiserv, Jack Henry and Pediment.

• Fiserv (January 8, 2026). Fiserv Collaborates with Microsoft to Accelerate AI-Driven Innovation.

• FIS (April 29, 2026). FIS Launches New Platform Giving Banks Control Over Digital Money. Lyriq launch.

• FIS (April 30, 2026). FIS and Leading Financial Institutions to Build Their Own Digital Tokenized Money Network. Project Keystone.

Programmable money and tokenized settlement

• JPMorgan Kinexys. Kinexys Pilots First USD-Denominated Deposit Tokens (June 2025).

• The GENIUS Act (2025). S.1582 - GENIUS Act. Effective January 2027.

• OCC (December 12, 2025). OCC Conditionally Approves Five National Trust Bank Charter Applications. Conditional approvals for Circle, Ripple, Paxos, BitGo, Fidelity Digital Assets.

• Partior. Partior platform overview. Bank-owned consortium platform doing atomic cross-bank tokenized deposit settlement since 2021.

• BIS (2024-2026). Project Agorá. Seven-central-bank tokenized cross-border settlement project.

• Citi. Citi Token Services. Live in US, UK, Singapore, Hong Kong as of 2025.

• Tradeweb (April 2026). 2026 ICD Portal Client Survey.

• ABA Banking Journal (March 2026). Tokenized deposits: the future of tokenized money for financial market settlement. Cites McKinsey $2 trillion forecast.

Enterprise modernization comparables

• Tessera Labs (2026). Tessera platform overview. Multi-agent AI for ERP modernization.

• DataMigration.AI (2026). Global Bank Core Banking Migration Case Study. 18-month migration in 4 months, 8 AI agents.

• Backbase (January 2026). AI Core Banking Integration: Strategies That Scale. Industry data: 30% of full migrations succeed.

Visa stablecoin settlement hits $7 billion run rate as pilot expands to nine blockchains

Visa expanded its stablecoin settlement pilot to nine blockchains including Base, Polygon, Canton, Arc and Tempo, with annualized volume reaching $7 billion — a 50% quarterly increase that demonstrates growing institutional adoption of blockchain payment rails.

https://www.theblock.co/post/399405/visa-stablecoin-settlement-hits-7-billion-run-rate-pilot-expands-nine-blockchains

‘Tokenize the world’: Securitize partners with Computershare to bring more stocks onchain

Securitize partnered with Computershare to enable tokenized share issuance for publicly listed companies, potentially bringing trillions in U.S. equities on-chain through the world’s largest transfer agent and registrar.

https://www.theblock.co/post/399390/tokenize-world-securitize-computershare-to-bring-more-stocks-onchain

JPMorgan Taps Former Goldman Exec to Lead Blockchain Unit

JPMorgan appointed former Goldman Sachs executive Oliver Harris to lead its Kinexys blockchain division, signaling the bank’s commitment to growing institutional adoption of tokenized payment and settlement infrastructure.

https://www.bloomberg.com/news/articles/2026-04-28/jpmorgan-taps-former-goldman-executive-to-lead-blockchain-unit

FIS introduces platfrom to give banks control over digital money

FIS launched Lyriq, a platform enabling banks to issue and manage their own digital money including tokenized deposits and digital currencies while keeping deposits on their balance sheets — addressing a key regulatory concern for traditional banks.

https://www.finextra.com/pressarticle/109643/fis-introduces-platfrom-to-give-banks-control-over-digital-money

Regulation & Policy

Singapore revisits bank prudential restrictions on permissionless blockchains

Singapore’s Monetary Authority launched a consultation on revised prudential rules for banks using permissionless blockchains for tokenized assets and stablecoins, offering lighter-touch alternatives to previously proposed restrictions.

https://www.ledgerinsights.com/singapore-revisits-bank-prudential-restrictions-on-permissionless-blockchains

ECB signs agreements with European standard setters to facilitate digital euro payments

The European Central Bank signed agreements with European standard setters to facilitate digital euro payments infrastructure, advancing technical preparations for the potential CBDC rollout across the eurozone.

https://www.ecb.europa.eu//press/pr/date/2026/html/ecb.pr260424~202f9d832b.en.html

Research & Analysis

Digitalisation and innovation - opportunities and risks for financial health

The Bank for International Settlements published research on digitalisation and financial health, examining how digital innovation enhances access to payments and financial services while creating new vulnerabilities including fraud and data privacy risks.

https://www.bis.org/fsi/fsibriefs31.htm

Cryptoasset service providers as financial intermediaries: risks and policy approaches

BIS released analysis on cryptoasset service providers as financial intermediaries, detailing how major platforms now offer banking-like services including lending and derivatives, requiring enhanced regulatory frameworks and risk management approaches.

https://www.bis.org/fsi/fsipapers27.htm

Tokenized Money

Czech Central Banker Says Bitcoin May Help Bolster Reserves

Czech Central Bank Governor Ales Michl stated that adding Bitcoin to official reserves could improve portfolio performance, making the Czech Republic the latest central bank to seriously consider digital asset diversification.

https://www.bloomberg.com/news/articles/2026-04-28/czech-central-banker-says-bitcoin-may-improve-reserve-portfolio

Joachim Nagel: The digital euro - anchoring Europe’s strategic autonomy in a digital future

Bundesbank President Joachim Nagel delivered a keynote on the digital euro as key to Europe’s strategic autonomy in digital payments, emphasizing the importance of sovereign digital currency infrastructure for financial independence.

https://www.bis.org/review/r260428f.htm

The American banking lobby is currently paddling hard at the first wave. As the Senate Banking Committee markup approaches, the North Carolina Bankers Association has been circulating a script urging member banks to call Senator Thom Tillis’s office and demand that the CLARITY Act include an airtight prohibition on anything “economically or functionally equivalent” to interest on stablecoin balances. The argument is that if a crypto exchange can pay 4% on a stablecoin balance, depositors will leave checking accounts and the community deposit franchise will erode. Treasury Secretary Scott Bessent is urging the Senate to pass the bill. Senators are taking meetings and it’s not like the pitch is incoherent.

I doubt it’s the smallest wave in the set.

Depositors have been able to find 4% elsewhere for three years. Money market funds now hold more than $7.6 trillion, according to ICI weekly data. The share of US deposits that are non interest bearing has fallen sharply since their March 2022 peak, with call report analysis showing a cumulative drop of more than thirty percent at US banks, before a single stablecoin paid a cent of yield. The rate competition is already happening, and banning one channel for it will, at best, just slow the trend. What the lobbying ignores is the structure forming behind the first wave: a fully programmable investment stack, atomic by default, risk calibrated to each user’s preference, accessible from the same wallet that holds stablecoins, and sitting ready to soak up every dollar that used to be idle.

The first wave: stablecoin yield

The wave the banking lobbying is designed to break is a real one, and we should name it precisely. A stablecoin pays no yield. A money market fund holding Treasuries pays 4%. If a user can hold a stablecoin balance at a venue where the venue (or an affiliated distributor, or a loyalty program) will share the underlying T-bill yield with them, the stablecoin starts to behave like a yield bearing checking account. That is the mechanism the banks are asking Congress to block.

The pitch seemingly assumes two things. It assumes this is the main channel through which depositors will access onchain yield. And it assumes blocking that channel closes the gap. I suspect neither of those is correct. Even inside the current perimeter, the yield bearing substitute is already emerging in a different form that GENIUS and CLARITY do not reach, because it is not a stablecoin.

JPMorgan’s deposit token, JPMD, which launched to institutional clients on Coinbase’s Base network in November 2025 and is heading to Canton in phases through 2026, can legally pay interest. It can pay interest because it is a bank deposit, not a stablecoin. Kinexys has processed more than $3 trillion in cumulative notional value since inception, with average daily transaction volume now above $5 billion. The same logic applies to Citi’s tokenized deposit infrastructure, to Partior’s USD, EUR, and SGD settlement rail, and to Fnality’s utility settlement coins. The banks building atomic settlement infrastructure for commercial bank money can offer yield inside the regulatory perimeter. The prohibition the community banks are asking for does not stop their largest competitors. It’ll actually stops smaller banks from competing with the megabanks on equal terms.

So even as a wave one defense, the script feels to me like it’s self harming. Community banks are asking Congress to fortify the beach in a way that keeps JPMorgan dry while the tide rises around them. But fine, grant them the prohibition. Assume the CLARITY Act passes exactly as written, airtight, no carve outs. What happens next is not that depositors stay put. What happens next is that the second wave arrives, and the second wave is bigger.

The second wave: tokenized money market funds

The tokenized Treasury and money market fund category has grown from roughly $5.5 billion at the start of 2025 to more than $13 billion by early April 2026, according to RWA.xyz data. Circle’s USYC is at $2.9 billion. BlackRock’s BUIDL is at $2.5 billion. Ondo’s USDY is at $1.9 billion. Franklin Templeton’s BENJI, which launched in 2021 and was the first SEC-registered mutual fund to use a public blockchain as its system of record, crossed $1 billion in March 2026. These are not pilots and they are not demos. They are live mutual funds holding Treasuries, Treasury bills, and repos, issuing ERC-20 style tokens that represent shares, and paying yield directly to holders through rebase mechanics or share issuance.

Franklin Templeton recently made two of its institutional money market funds, LUIXX and DIGXX, blockchain compatible. The LUIXX modifications let it hold short term Treasuries and meet stablecoin reserve standards. DIGXX offers an onchain share class with 24/7 settlement. The firm manages $1.7 trillion in AUM and now deploys Benji across ten blockchains, including Canton. Sandy Kaul, head of innovation at Franklin Templeton, said it recently

institutions will migrate to these rails because they will be able to post less operational capital, since immediate settlement eliminates the need to fund 24 hour plus settlement cycles.

It’s worth reading that sentence again, because it is the entire argument. A tokenized money market fund is not a novelty. It is a better checking account. It holds T-bills, so it pays something close to the T-bill rate. It settles atomically against stablecoins or deposit tokens, so moving in and out is a matter of seconds rather than days. It is accessible from the same wallet that holds the user’s stablecoin balance. It is available 24/7. There is no float to lose, no settlement window to bridge, no reason not to sweep idle cash into it at every opportunity.

The CLARITY Act does not reach this. BUIDL is a security. BENJI is a mutual fund. These instruments are regulated under the 1940 Act, and they already pay yield, and they already settle onchain, and they already compose with stablecoin balances. When a CFO’s treasury platform can automatically sweep excess cash into a tokenized MMF at the end of each payment cycle and redeem it at the start of the next one, then how long before the non interest bearing corporate operating account stops existing as a category?

That sweeping is not hypothetical. Ripple’s GTreasury acquisition in October 2025, at a $1 billion valuation, was explicitly positioned around this capability. The platform handled $13 trillion in payments volume for Fortune 500 clients and SMEs in 2025, and in April 2026 Ripple added Digital Asset Accounts that let corporate treasurers hold and manage stablecoins and digital assets alongside cash, with tokenized MMF and repo integrations on the roadmap.

This is the wave the banks should actually be worried about, and the current lobbying script does nothing about it.

The third wave: tokenized equities

Behind the tokenized MMF wave is a larger one still. On March 18, 2026, the SEC approved Nasdaq’s framework to trade tokenized securities alongside traditional shares, with settlement through DTC. Earlier in March, Intercontinental Exchange announced a strategic investment in OKX at a $25 billion valuation, securing a board seat and granting OKX’s 120 million users access to NYSE tokenized equities. Robinhood’s CEO described tokenized stocks as “a freight train.” Kraken’s xStocks platform has processed more than $25 billion in cumulative trading volume since launching in June 2025 and plans to expand from 100 to over 500 tokenized equities by the end of this year.

The SEC approval is the inflection. Until March, every major tokenized equity product available to retail investors operated under Regulation S, which excluded US investors entirely. The instruments were designed for emerging-market retail and for non-US institutional access. Nasdaq’s approved framework brings tokenized equities inside the US regulatory perimeter for the first time, covering certain listed equities and ETPs that are eligible for the DTC tokenization pilot. The race between Nasdaq and ICE for the tokenized portion of the $152 trillion global equity market, per WFE end-2025 data, is the most consequential piece of financial infrastructure competition since electronic trading replaced open outcry.

For the deposit franchise, the mechanism is the same as with tokenized MMFs, just one risk step along the curve. A user with a stablecoin balance can, in the same wallet, hold tokenized MMF shares (low risk, Treasury bill yield), tokenized investment grade credit (slightly higher), tokenized equities (higher still), and tokenized alternatives if they want. The risk calibration is continuous. The settlement is atomic. The movement between them is free. The reason to leave cash sitting in a non interest bearing checking account disappears not because interest becomes available on the cash itself, but because the cost of not deploying the cash drops to nearly zero. There is no longer any settlement friction to justify the idle balance.

The fourth wave: everything else

The fourth wave is RWAs writ large. Tokenized private credit, tokenized real estate, tokenized commodities, tokenized alternative funds. This is the wave that is still forming, far enough out that its shape is uncertain, but the institutional investment behind it is not. BlackRock, Franklin Templeton, and Apollo have all launched tokenized funds. DTCC has selected Canton as its tokenization network for traditional instruments. BNY, State Street, Goldman, and HSBC are each building variants of the same product stack. Nasdaq’s framework is explicit about extending beyond equities over time.

The point is not that every asset gets tokenized on a five year horizon. The point is that the direction of travel is toward a single wallet holding a continuously rebalanced portfolio of tokenized instruments, with the user’s cash position dynamically allocated to whatever risk return profile they want, with atomic settlement making the allocation friction free. At that point the concept of a “bank deposit” as a distinct thing becomes a specialized product, chosen for the FDIC insurance and the bank’s credit, not because it is the default place where working capital sits.

This is what the bank lobbying misses I think. The prohibition on stablecoin yield is written as if the game ends at wave one. The game does not end there. Waves two, three, and four are already forming, they are being built by the largest asset managers on the planet, they have SEC approval where they need it, and they do not rely on stablecoins paying interest. They rely on tokenized access to every rung of the risk-return curve, composable with each other, atomically settled, available from the same interface.

The deposit franchise was never about rate

There is a version of this argument the banks can still win, but it requires abandoning the one they are currently having. The deposit franchise, the thing the bank lobbyists are trying to protect, was never primarily about rate competition. Banks have always been able to out pay money market funds when they needed to, via brokered CDs, high yield savings accounts, or promotional rates for specific deposit tiers. The franchise was about friction. It was about the fact that the operating account of a small business, the corporate treasury balance of a mid market firm, the municipal deposit of a school district, the payroll account of a hospital, all of these sat with a specific bank because moving them was expensive, slow, and risky. Idle balances stayed idle because deploying them was not worth the settlement cost.

Atomic settlement removes the friction that kept the idle balances in place. Tokenized MMFs and tokenized securities create the destinations those balances will flow into. The stablecoin yield question is a sideshow. Even if you concede the community banks’ lobbying fight in its entirety, the underlying plumbing has already changed. The corporate treasurer does not need an interest bearing stablecoin. The corporate treasurer needs an overnight tokenized MMF sweep that settles atomically from their operating wallet. That product exists. It is live. Fortune 500 clients are using it.

Non interest bearing deposits at US banks fell by more than 30% from their March 2022 peak without any of this being available yet. The next leg of decline is not going to come from depositors chasing 4% yield on stablecoins. It is going to come from the disappearance of the idle balance as a concept. The treasurer who used to hold $50 million in a USD nostro account to pre-fund tomorrow’s FX leg now settles atomically, holding the $50 million in local currency until the moment of execution. The broker dealer who used to park cash collateral overnight now accepts continuously rebalanced tokenized Treasuries. The corporate AP system that used to hold three days of working capital in anticipation of payment cycles now sweeps every cent into a tokenized MMF until the moment it is needed.

Each of these changes takes a pool of non interest bearing balances off the bank’s balance sheet, not because the depositor got a better rate, but because the depositor no longer needs the balance to sit. The funding does not just get more expensive. It disappears. The replacement funding is term debt, wholesale funding, or rate-paying deposits, all of which compress net interest margin in ways the idle-money subsidy did not.

What the script likely gets backwards

The worst thing about the bank lobbying is not that it picks the wrong fight, though it probably does. It is that the fight they are picking is likely accelerating the substitution. If stablecoin yield is prohibited, the product that replaces idle deposits will not be an interest bearing stablecoin. It will be a tokenized MMF sweep that settles atomically against a non yielding stablecoin. The MMF pays the yield, the stablecoin provides the rails, and the user cannot tell the difference. The prohibition forces the substitute into exactly the form that the banks cannot touch, because it is a security, not a payment instrument, and the CLARITY Act is not a securities statute.

This is the same structural pattern that took apart SMS revenue for the telecoms. Global operator messaging revenue peaked around 2012 at roughly $120 billion, per Strategy Analytics and Informa forecasts at the time. Telcos lobbied, threatened to throttle OTT traffic, argued that WhatsApp was freeloading on their infrastructure. A Mobilesquared analysis found that some operators raised international SMS rates by more than 500% as they tried to defend the revenue line, which accelerated the migration. The carriers that survived were the ones that let the messaging layer go and priced the data that ran underneath. The carriers that kept trying to regulate the price of a substitute riding on structurally better economics lost both the substitute and the larger fight. I wonder if the bank lobby is writing an SMS carrier script in 2026. The result feels like it will rhyme.

I don’t think every wave in this set breaks at once. The tokenized MMF wave is already breaking. The tokenized equity wave is cresting now, post SEC approval. The tokenized alternatives wave is still forming. The banks that are building atomic settlement infrastructure for their own clients, JPMorgan, Citi, Goldman, HSBC, the DTCC consortium on Canton, are paddling hard, but they are paddling in the right direction. They are building the products that will be on the other side of this set. The banks lobbying for the CLARITY prohibition are paddling into the first wave with their backs to everything behind it.

The deposit franchise was built on the assumption that money sits still between use cases. Atomic settlement removes the reason for it to sit, and tokenized investment rails provide the destination for it when it moves. The cost of funding for US banks is going to rise, and it is going to rise regardless of what the statute says about stablecoin yield. The lobbying is choosing which wave to get hit by first.

The set is already in the water. The ones that see it are going to paddle the channel around. The ones that don’t are about to get held under.

References

Legislation and regulatory sources

• GENIUS Act: White House fact sheet on Trump signing GENIUS Act into law, July 18, 2025

• SEC Release No. 34-105047: Order approving Nasdaq rule change for trading tokenized securities, March 18, 2026

• Eleanor Terrett reporting on NCBA lobbying script (Twitter/X, April 18, 2026, via BeInCrypto)

• FinTech Weekly on CLARITY Act draft text with “economically or functionally equivalent” language, March 2026

• DL News: “White House economists say stablecoin yields are fine. Banks are having none of it,” April 2026 (on Bessent’s support for the CLARITY Act)

Deposit and money-market fund data

• ICI weekly money market fund assets release, April 16, 2026 ($7.64 trillion)

• BauerFinancial: “Bank Deposits Migrate into Interest-Bearing Accounts,” January 2026 (noninterest-bearing deposits down more than 30% since March 2022)

• Curinos Commercial Analyzer: “How To Deal With Declining NIB Deposits”

• Federal Reserve Bank of Kansas City: “Bank Deposit Rates Haven’t Kept Pace with Yields on Other Investments”

Tokenized asset market data

• RWA.xyz: tokenized US Treasury and MMF AUM data, April 2026

• Kraken blog: “Celebrating 100 xStocks,” March 18, 2026 (100 products, $25B volume, 500 target)

• Kraken blog: “xStocks surpasses $25 billion in total transaction volume,” February 19, 2026

• JPMorgan press release: “JPM Coin (JPMD) USD Deposit Token Available for Institutional Clients,” November 12, 2025

• AssetTokenization.com: “Inside Kinexys,” January 2026 ($3 trillion cumulative, $5 billion daily as of December 2025)

• Partior announcement of Deutsche Bank as strategic investor, November 27, 2024 (confirming USD, EUR, SGD support)

• Franklin Resources preliminary AUM, February 28, 2026 ($1.74 trillion)

• Decrypt: “Franklin Templeton Expands Tokenized Fund Platform to Canton Network,” November 12, 2025

• Ripple press release: “Ripple Breaks into Corporate Treasury with $1B GTreasury Acquisition,” October 16, 2025

• Ripple press release: “Ripple Treasury Launches the First Treasury Management System with Native Digital Asset Capabilities,” April 1, 2026

• Canton Network press release on DTCC-Digital Asset partnership, December 17, 2025

Infrastructure and industry data

• ICE press release: “ICE Makes Investment in OKX, Establishing Strategic Relationship,” March 5, 2026

• CNBC: “Tokenization of assets is freight train coming to markets: Robinhood CEO,” Token2049 Singapore, October 2, 2025

• World Federation of Exchanges FY 2025 market highlights, February 27, 2026 ($151.94 trillion global equity market cap)

Historical analogy sources

• TelecomTV: “Telcos must face up to the reality of declining SMS revenues” (citing Strategy Analytics’ Global Mobile Messaging Forecast that SMS peaked in 2012)

• Mobilesquared: “Sky-high SMS rates damaging long-term opportunity for A2P SMS,” September 2023 (3.9% of operators raised rates over 500%)

DoorDash to offer stablecoin payouts with Tempo in push toward everyday crypto payments

DoorDash partners with Tempo to offer stablecoin payouts to drivers, joining Stripe and Coastal Bank in deploying stablecoin payment flows on the network. This marks a significant expansion of stablecoin adoption in mainstream gig economy payments.

https://www.theblock.co/post/398270/doordash-to-offer-stablecoin-payouts-with-tempo-in-push-toward-everyday-crypto-payments

Nium and Coinbase partner on global stablecoin settlement

B2B cross-border payments provider Nium teams up with Coinbase to enable USDC stablecoin payments across its platform. The partnership signals growing institutional adoption of stablecoins for international settlement.

https://www.finextra.com/newsarticle/47607/nium-and-coinbase-partner-on-global-stablecoin-settlement

How Mastercard plans to settle card payments with stablecoins

Mastercard is testing stablecoin settlement with SoFiUSD to accelerate card transaction clearing, bridging traditional finance and blockchain infrastructure for institutional payments.

https://cointelegraph.com/news/mastercard-stablecoin-settlement-sofiusd-explained

Three Major Japanese Financial Institutions Tap Canton to Bring Government Bonds On-Chain

Three major Japanese financial institutions are using Canton Network to bring government bonds on-chain, advancing institutional tokenization of sovereign debt securities.

https://thedefiant.io/news/tradfi-and-fintech/japanese-tradfi-firms-tap-canton-to-tokenize-government-bonds

OCBC’s Lion Global launches tokenized physical gold fund on public blockchain

OCBC’s Lion Global launches tokenized physical gold fund on public blockchain, expanding institutional real-world asset tokenization beyond traditional securities.

https://www.ledgerinsights.com/ocbcs-lion-global-launches-tokenized-physical-gold-fund-on-public-blockchain/

Regulation & Policy

OCC Issues Updated Model Risk Management Guidance

OCC issues updated model risk management guidance coordinated with Federal Reserve and FDIC, providing clearer frameworks for banks using AI and advanced analytics in risk assessment.

https://www.occ.gov/news-issuances/news-releases/2026/nr-occ-2026-29.html

Hong Kong allows secondary trading of tokenized products, initially focusing on money market funds

Hong Kong allows secondary trading of tokenized products starting with money market funds, creating regulatory framework for institutional tokenized asset markets.

https://www.thestandard.com.hk/finance/article/329792/Hong-Kong-allows-secondary-trading-of-tokenized-products-initially-focusing-on-money-market-funds

UK sets out plan to integrate payments rules covering stablecoins and tokenized deposits

UK Treasury proposes unifying payment rules for traditional services, stablecoins, and tokenized deposits during Fintech Week. The regulatory framework aims to integrate digital payment methods into existing financial infrastructure.

https://www.theblock.co/post/398244/uk-sets-out-plan-to-integrate-payments-rules-covering-stablecoins-and-tokenized-deposits

US senator urges delay of CLARITY Act Senate markup until May: Report

US Senator Thom Tillis urges delay of CLARITY Act Senate markup until May, citing need for more industry input. The postponement reflects ongoing tensions between banking and crypto sectors over stablecoin regulations.

https://cointelegraph.com/news/us-senator-asks-clarity-senate-markup-pushed-back-april

Research & Analysis

BIS says stablecoins act more like ETFs than money, warns of fragmentation without global rules: report

BIS warns that stablecoins function more like ETFs than actual money and calls for coordinated global regulation to prevent fragmentation across the $300 billion market.

https://www.theblock.co/post/398072/bis-says-stablecoins-act-more-like-etfs-than-money-warns-of-fragmentation-without-global-rules-report

Stablecoins: framing the debate

BIS General Manager Pablo Hernández de Cos addresses stablecoin regulatory challenges at Bank of Japan seminar, emphasizing need for international coordination on digital money frameworks.

https://www.bis.org/speeches/sp260420.htm

Piero Cipollone: Sparking the transformation of finance: tokenization and the role of central banks

ECB Executive Board member Piero Cipollone discusses tokenization’s transformative potential for finance and central banks’ role in shaping digital asset infrastructure.

https://www.ecb.europa.eu//press/key/date/2026/html/ecb.sp260415~868b59bca9.en.html

Stablecoins not a threat to banks in near term: Moody’s analyst

Moody’s analyst concludes stablecoins pose limited near-term threat to traditional banks due to yield restrictions and robust existing payment infrastructure in developed markets.

https://cointelegraph.com/news/stablecoins-not-a-threat-to-banking-sector-in-the-near-term-moody-s

Tokenized Money

Bank of Korea’s new chief vows to push CBDC, deposit tokens; leaves out stablecoins

Bank of Korea’s new Governor Shin Hyun-song prioritizes CBDCs and deposit tokens while notably excluding stablecoins from his inaugural policy address. The stance reflects his previous skeptical position on private stablecoins during his BIS tenure.

https://www.theblock.co/post/398223/bank-of-korea-new-chief-cbdc-deposit-tokens

Hong Kong awards first stablecoin licenses to HSBC and Standard Chartered

Hong Kong awards its first stablecoin licenses to HSBC and Standard Chartered, marking a milestone in the territory’s digital asset regulatory framework. The licenses enable major banks to issue regulated stablecoins in a key Asian financial center.

https://www.elliptic.co/blog/hong-kong-awards-first-stablecoin-licenses-to-hsbc-and-standard-chartered

These are not pilot programs. These are the institutions that run the plumbing of global finance, and they are rebuilding that plumbing on programmable rails.

I think this is the most important thing happening in banking right now, and I think most bank executives are missing it. Because the conversation inside most banks is still about products: should we tokenize bonds? Launch a stablecoin? Offer tokenized deposits? Those are reasonable questions. But they’re the wrong starting point. The starting point should be infrastructure.

The product trap

Anyone who approaches this as ‘which products are suitable for tokenization’ is likely to make a first principle error. I think the right framing is whether blockchain is a baseline infrastructure layer that cuts across the organization. Not a product. A platform.

When FIs treat tokenization as a product question, the pattern is looks very predictable. Someone in the innovation team runs a pilot. They tokenize a bond, or a repo transaction, or a fund share. The pilot works. There’s a press release. And then not much happens, because the pilot was a product, and products need infrastructure to scale, and the infrastructure doesn’t exist inside the institution yet. So the pilot sits in a sandbox, demonstrating what’s possible without changing how the FI actually operates.

That distinction matters for how FIs allocate capital, structure teams, and think about competitive positioning. Pains me to say this as proud product person, but we have to guard against product thinking leading to small budgets in innovation labs, isolated from the core business. If we have the end in mind, then infrastructure thinking leads to multi-year investment in core systems, organizational redesign, and strategic partnerships. One produces demos. The other produces capability.

McKinsey’s base case for tokenized financial assets (excluding stablecoins and CBDCs) is roughly $2 trillion by 2030. BCG’s estimate, using a broader scope that includes tokenized money, is $16 trillion. The gap between those numbers isn’t an analytical disagreement. It’s the difference between counting tokenization products and counting the infrastructure those products run on. The infrastructure number is an order of magnitude larger because infrastructure creates network effects that individual products can’t.

What’s actually being built

The reason I’m writing this now is that the infrastructure layer is forming fast, and I don’t think most bank executives appreciate how much has moved in the last twelve months.

Start with the pipes. DTCC, the backbone of US securities settlement, announced in December 2025 that it will tokenize DTC custodied US Treasury securities on the Canton Network using its ComposerX platform. An MVP is targeted for the first half of 2026, with plans to expand to a broader range of DTC-eligible assets based on client demand. This isn’t a pilot. This is the entity that settles virtually every US equity and fixed-income trade building tokenization into its core infrastructure.

SWIFT, which connects over 11,000 institutions in more than 200 countries, completed a multi-bank tokenized bond settlement trial in January 2026 with BNP Paribas, Intesa Sanpaolo, and SG Forge. It wasn’t a proof of concept. It was the first time SWIFT orchestrated tokenized asset transactions as a single coordinated process using both blockchain and traditional systems. SWIFT is now adding a blockchain based ledger to its infrastructure, designed in collaboration with over 30 banks, initially focused on real-time, 24/7 cross-border payments.

The exchanges are moving too. On March 18, 2026, the SEC approved Nasdaq’s framework for trading tokenized stocks and ETFs on blockchain rails alongside traditional shares. Russell 1000 stocks and major ETFs can now trade and settle as blockchain-based tokens, with the same tickers, prices, and investor rights. Nasdaq tapped Kraken to distribute stock tokens internationally. Six days later, NYSE announced a partnership with Securitize to build a 24/7 digital trading platform for tokenized equities, ETFs, and fixed income, with a pilot targeted for Q3 2026.

Goldman Sachs is spinning out its tokenization platform, GS DAP, as an independent company by mid 2026. The reasoning is telling: having the platform on Goldman’s balance sheet made it hard to get broad institutional adoption. Other banks didn’t want to run their infrastructure on a competitor’s platform. Making it independent and industry-owned removes that barrier. Tradeweb became the first strategic partner, integrating its trading and liquidity capabilities across fixed income. GS DAP runs on the Canton Network, which now supports over $6 trillion in on-chain assets across 600 institutions.

BNY, the world’s largest custodian with nearly $58 trillion in assets under custody, launched tokenized deposits in early 2026 for collateral and margin workflows. But the bigger story is how Carolyn Weinberg described their approach: mapping every post-trade step end-to-end and asking what can be reimagined. Not “which product should we tokenize?” but “how does the entire post-trade process work differently on programmable rails?”

That’s infrastructure thinking. And it’s happening at the institutions that move markets.

The network economics

Here’s why I think the product vs infrastructure distinction matters so much economically.

Products compete on features. A tokenized bond competes with other bonds on yield, credit quality, and liquidity. If your tokenized bond is slightly better than the next one, you get a slightly bigger market share. The economics are linear.

Infrastructure creates network effects. A shared settlement layer becomes more valuable as more participants join. A common tokenization standard becomes more useful as more assets conform to it. A coordinated compliance framework becomes more efficient as more institutions adopt it. The economics are exponential. That’s a fundamentally different business case, and it requires a fundamentally different investment thesis.

Look at what’s forming. The Canton Network connects 600 institutions with built in privacy controls and cross-ledger interoperability. The Cari Network (KeyBank, Huntington, First Horizon, M&T, Old National) is building tokenized deposit infrastructure on ZKsync anchored to Ethereum. The IBAT consortium is creating a shared network for community banks in Texas. Custodia and Vantage’s tokenized deposit infrastructure is being adopted by 600 banks through the Participate network. These aren’t really product launches. They’re infrastructure buildouts where the value comes from the network, not any single node.

The analogy I find myself coming back to is Visa. In 1958, Bank of America launched BankAmericard as a product, a single bank’s credit card mailed to 65,000 people in Fresno. It was a product for eight years. Then in 1966, BofA started licensing it to other banks. By 1970, the issuing banks took over entirely, forming a member owned consortium that Bank of America no longer controlled. It was rebranded as Visa in 1976. The product became infrastructure, and the infrastructure became the most valuable payments network on earth. No single bank could have built that alone. But once the shared rails existed, every bank that plugged in could offer its own products on top: credit cards, debit cards, rewards, corporate cards. The products differentiated. The infrastructure was shared.

Goldman spinning out GS DAP follows the same logic. A single bank’s tokenization platform, made independent and industry owned so it can become shared infrastructure. The Cari Network, the IBAT consortium, all of them are similar pattern of banks recognizing that the value is in the network, not any single node.

The banks still asking which product to tokenize are thinking about the card. The ones building shared infrastructure are thinking about the network.

The interoperability imperative

This is where I think the infrastructure argument gets most urgent, because the biggest risk in the current buildout is fragmentation.

Right now, tokenized assets live on different blockchains with different standards, different compliance frameworks, and different settlement mechanisms. A tokenized Treasury on Canton can’t easily interact with a tokenized deposit on Ethereum, which can’t easily settle against a stablecoin on Solana. That fragmentation is fine for pilots and proofs of concept. It’s a disaster for infrastructure.

SWIFT seems to understand this. Its interoperability trials weren’t about building a single blockchain. They were about connecting different blockchains through a common coordination layer, so that a bank using one network can transact with a bank using another. The January 2026 trial demonstrated exactly this: seamless exchange and settlement of tokenized bonds across blockchain platforms and traditional systems.

Canton’s architecture works the same way. It’s designed as a “network of networks” where institutions operate independent but interoperable ledgers. Each institution keeps its own data private. The Global Synchronizer enables atomic transactions across applications without sacrificing confidentiality. That’s why DTCC chose it for Treasury tokenization: it preserves the privacy and control that regulated institutions require while enabling the composability that makes programmable settlement useful.

The lesson here is that infrastructure without interoperability is just a more expensive silo. Banks that build tokenization capability in isolation, on proprietary systems that don’t connect to the broader ecosystem, will find themselves with a product, not a platform. And in a networked world, products that don’t connect become dead ends.

Treasury as the proving ground

I’ve written before about how programmable settlement changes the economic character of deposits. But treasury is where infrastructure thinking meets real money in the most immediate way.

Think about what corporate treasury looks like today. Cash sits in bank accounts earning whatever the bank offers, or in money market funds that settle T+1 or T+2. Collateral is managed through manual processes with end-of-day reconciliation. Intraday liquidity is expensive and hard to optimize because the systems that manage it are slow. FX settlement still carries Herstatt risk for cross-timezone trades. Repo markets close on weekends.

Now think about what treasury looks like on programmable infrastructure. Cash is a token that can be moved instantly, 24/7, to wherever it generates the highest risk-adjusted return. Collateral management is automated through smart contracts that rebalance positions in real time based on predefined rules. Intraday liquidity is optimized continuously because the infrastructure never stops. FX settlement is atomic, eliminating counterparty risk. Repo can happen at 2am on a Sunday.

Someone at Alpha Point made this case directly at the recent American Banker On-Chain event

“This is not about incremental efficiency. This is a substantial change on the balance sheet.”

They’re right. This isn’t 5% cost savings on post trade processing. This is a structural change in how treasury generates and deploys capital.

The tokenized Treasury market is now over $11 billion, up from $3.9 billion at the start of 2025. Circle’s USYC has overtaken BlackRock’s BUIDL as the largest tokenized Treasury product at $2.2 billion. Goldman announced 24/7 tokenized Treasury bond trading. DTCC is tokenizing DTC custodied Treasuries. The infrastructure for programmable treasury isn’t theoretical. It’s being built, and the banks that connect to it first will have a structural advantage in how they manage their own balance sheets and serve their institutional clients.

What this means for bank boards

I want to be specific about what infrastructure thinking actually changes at the decision making level, because this is where I see the biggest disconnect.

When a bank treats tokenization as a product, the budget sits with a business line. It’s measured on product P&L. It competes for funding against other product initiatives. The team is small, often in an innovation lab, and the rest of the bank doesn’t need to change how it operates. The board hears an update once a quarter and nods politely.

When a bank treats tokenization as infrastructure, the investment is actually enterprise wide. It touches technology, operations, compliance, treasury, custody, and client servicing. It requires organizational change with either a dedicated unit like JPMorgan’s Kinexys or U.S. Bank’s Digital Assets and Money Movement group, or a consortium model like Cari Network, or a strategic partnership with an infrastructure provider like Stablecore. The board isn’t hearing an update. The board is making a multi-year capital allocation decision about the bank’s operating model.

That’s a harder conversation. It requires more conviction, more coordination, and more willingness to invest before the returns are fully visible. But it’s the right conversation, because the infrastructure being built right now will determine which banks are at the center of the financial system in 2030 and which are at the periphery.

Global banking IT spending is projected to exceed $760 billion in 2025, rising at 9% annually. Seven in ten banks plan to increase infrastructure spending. I don’t doubt that banks are willing to invest in technology. I think the challenge is directing that investment in the right layer. Another core banking modernization that preserves the existing architecture is a product investment. Connecting to the programmable settlement infrastructure that DTCC, SWIFT, the exchanges, and the major custodians are building is an infrastructure investment. One maintains the status quo. The other positions the bank for what’s coming.

The banks building pipes

I’ve been writing about programmable money for a while now, and the thing that strikes me most about where we are in early 2026 is how fast the conversation has shifted from “should we?” to “how do we?” The regulatory environment is favorable. The technology works. The business case is clear.

But the execution models that are succeeding aren’t the ones chasing tokenization products. They’re the ones building, or connecting to, infrastructure. BNY mapping post trade end to end. Goldman making GS DAP industry neutral. DTCC putting Treasuries on Canton. SWIFT adding a blockchain ledger. Five regional banks forming Cari Network. The pattern is infrastructure first, products on top.

Every major technology transition in banking has followed this sequence. ATMs started as a product (cash dispensing) and became infrastructure (a shared network that changed how banks distributed services). Electronic trading started as a product (screen based execution) and became infrastructure (the backbone of modern capital markets). Internet banking started as a product (check your balance online) and became infrastructure (the platform for everything from payments to lending to wealth management). In every case, the banks that built or connected to the infrastructure early captured disproportionate value. The ones that treated the new technology as just another product offering lost ground to those that understood the shift.

Programmable money is following the same pattern. The product phase (tokenize a bond, run a pilot, issue a press release) is likely winding down. The infrastructure phase (rebuild the pipes, connect to shared networks, redesign operations) will start accelerating.

The question for every bank board is simple really: are you building products, or are you building pipes? Because in five years, the answer to that question will be obvious. And for some banks, it will probably be too late to change it.

References

Tokenization market size and projections

• McKinsey Estimates Tokenization Will Be Less Than $2 Trillion by 2030 — Ledger Insights

• Tokenized Funds: The Third Revolution in Asset Management Decoded — BCG

• Circle Overtakes BlackRock in Tokenized Treasuries as Market Hits Record $11 Billion — CoinDesk

• Tokenized U.S. Treasuries Hit $7.3B in 2025 — Yellow

DTCC and Canton Network

• DTCC and Digital Asset Partner to Tokenize DTC-Custodied U.S. Treasury Securities on the Canton Network — Canton Network

• DTCC, Canton, and the Next Phase of Tokenized Market Infrastructure — TRM Labs

• Wall Street Heavyweights Back Builder of Canton, a Network That Supports $6T On-Chain Assets — CoinDesk

• Digital Asset and Industry Working Group Complete Groundbreaking On-Chain US Treasury Financing on Canton Network — Tradeweb

SWIFT tokenization and interoperability

• SWIFT Completes Multi-Bank Tokenized Bond Settlement Trial — CCN

• Swift Takes Bold Steps to Unlock the Benefits of Digital Finance on a Global Scale — SWIFT

• Swift Completes Tokenized Asset Trial With BNP Paribas — PYMNTS

Exchange infrastructure

• SEC Approves Nasdaq’s Move to Allow Tokenized Securities Trading — CoinDesk

• Nasdaq Partners With Kraken to Distribute Tokenized Stocks Globally — CoinDesk

• NYSE Taps Securitize to Build Its 24/7 Tokenized Stock Trading Platform — Unchained

Goldman Sachs GS DAP

• Goldman Sachs Digital Assets to Spin-Out Technology Platform GS DAP — Goldman Sachs

• Goldman Sachs Focuses on Spinning Out Tokenization Platform — Markets Media

• Goldman Sachs Announces 24/7 Tokenized U.S. Treasury Bond Trading — AInvest

BNY digital assets

• BNY Launches Tokenized Deposits in Digital Assets Expansion — Bloomberg

• BNY Expands Digital Asset Platform with Launch of Innovative On-Chain Offering — BNY

• Financial System Modernization Trends and Insights 2026 — BNY

Bank infrastructure consortiums

• U.S. Regional Banks Building Tokenized Deposit Network on ZKsync (Cari Network) — CoinDesk

• Custodia’s Tokenized Deposit to Be Used in 600-Bank Network — American Banker

• IBAT Leads Push for Stablecoins and Tokenized Deposits — IBAT

Banking IT spending

• 70% of Banks Report Technology Infrastructure Spend to Increase in 2025 — Tech Channels

• Tech in Banking 2025: Transformation Starts with Smarter Tech Investment — BCG

• The State of Banking Technology in 2026: Why This Year Is Different — CCG Catalyst

Societe Generale unit adds MiCA-compliant stablecoin to MetaMask

Societe Generale’s digital unit integrated its MiCA-compliant USD stablecoin into MetaMask, expanding distribution to millions of crypto wallet users in one of the largest bank-backed digital currency initiatives to date.

https://www.theblock.co/post/397490/societe-generale-adds-stablecoin-metamask

Ripple, Kyobo Life Insurance partner to enable tokenized government bond settlement in South Korea

Ripple partnered with South Korea’s Kyobo Life Insurance to pilot tokenized government bond settlement, potentially reducing settlement cycles from two days to near real-time using blockchain infrastructure.

https://www.theblock.co/post/397491/ripple-kyobo-life-insurance

Major European SIX Group stock exchanges feeding data to Chainlink

SIX Group’s Swiss and Spanish stock exchanges began feeding equities market data on-chain via Chainlink, providing institutional-grade market data infrastructure for tokenized asset applications.

https://www.theblock.co/post/397450/major-european-six-group-stock-exchanges-feeding-data-to-chainlink

Visa deepens blockchain push with Tempo validator node launch

Visa launched a validator node on the Tempo blockchain to directly participate in transaction validation, deepening its infrastructure commitment to stablecoin settlement networks.

https://cointelegraph.com/news/visa-launches-validator-node-on-tempo-network-deepening-push-into-stablecoin-infrastructure

Regulation & Policy

Crypto, banks continue Senate bill spat with new proposal concerns: Report

Senator Thom Tillis plans to release draft language this week resolving the stablecoin yield dispute in the CLARITY Act, as both crypto firms and banks resist compromise proposals despite White House pressure.

https://cointelegraph.com/news/crypto-banks-continue-senate-bill-spat-with-new-proposal-concerns-report

Virginia updates law to hold unclaimed crypto in-kind for at least one year

Virginia enacted legislation requiring the state to hold unclaimed digital assets in their original form for at least one year before liquidation, providing stronger protections for dormant crypto holdings.

https://cointelegraph.com/news/virginia-updates-law-in-kind-crypto-custody-delay-liquidation-one-year

JPMorgan CFO warns stablecoins risk becoming ‘regulatory arbitrage’ play

JPMorgan’s CFO warned that stablecoin yield products risk becoming “regulatory arbitrage” vehicles that could undermine traditional banking regulations and deposit protections.

https://www.coindesk.com/business/2026/04/14/jpmorgan-cfo-warns-stablecoins-risk-becoming-regulatory-arbitrage-play

Research & Analysis

Michael S Barr: Brief remarks on stablecoins

Federal Reserve Vice Chair Michael Barr delivered key remarks on stablecoin risks and regulatory implementation challenges under the GENIUS Act, emphasizing the importance of proper oversight frameworks.

https://www.bis.org/review/r260408b.htm

Piero Cipollone: The digital euro - preparing for a potential launch

ECB Executive Board member Piero Cipollone outlined preparations for a potential digital euro launch, addressing implementation challenges and design considerations for the central bank digital currency.

https://www.bis.org/review/r260407e.htm

Tokenized Money

Bank of Korea governor nominee positive about won-denominated stablecoins

South Korea’s Bank of Korea governor nominee expressed support for won-denominated stablecoins, signaling potential regulatory openness to local currency digital assets alongside CBDC development.

https://www.reuters.com/world/asia-pacific/bank-korea-governor-nominee-positive-about-won-denominated-stablecoins-2026-04-14/

Those aren’t statistics about programmable money. They’re statistics about banks trying to do anything new. And programmable money is harder than most things banks have tried, because it touches payments, custody, settlement, compliance, treasury, client servicing, and risk management all at once. It’s not a product launch. It’s an operating model change.

The industry consensus right now is that the remaining barriers to programmable money are regulatory and technological. I think that’s wrong. Regulation is the most favorable in memory. The GENIUS Act is law, signed in July 2025, with the OCC already issuing proposed rules to implement it. The OCC has published multiple interpretive letters through the year confirming that banks can custody digital assets, execute transactions, participate in blockchain networks, and pay gas fees. The Basel Committee published third-party risk principles in December 2025. The technology providers are lining up.

The real barrier is execution. The actual operational capability to run programmable money safely inside existing constraints. I’ve spent the last 25 years watching the gap between strategy and implementation kill good ideas in banking. Not because the strategy was wrong. Not because the technology didn’t work. Because the organization, its processes and systems and culture, couldn’t absorb the change fast enough to make it real. And I think programmable money may be the widest version of that gap we’ve seen.

Where execution breaks down

Start with the systems. Over 75 percent of IT budgets at financial institutions go to maintaining what already exists. Celent’s 2025 data on corporate banking IT tells the same story: the vast majority of spend is mandatory, keeping the lights on or regulatory, and the share available for innovation is shrinking even as total IT spending rises.

The depth of the problem is easy to underestimate. Core banking systems are built on assumptions that programmable money violates. Batch processing cycles. End of day reconciliation. T+1 or T+2 settlement assumptions baked into ledger architecture. Currency fields that only accept three-letter ISO codes. At a recent conference, a bank exec from TD told a story about a corporate client asking how to define USDC in their ERP system. Nobody knew. The system wasn’t designed for a digital asset that isn’t a currency, isn’t a security, and doesn’t fit any existing classification.

That’s not a problem you solve with an API. It’s a data architecture problem, an accounting classification problem, and a process redesign problem, all rippling outward at once. How do you reconcile an onchain transaction with an offchain ledger? How do you account for a tokenized deposit that exists simultaneously as a bank liability and a blockchain token? How do you report it to regulators who haven’t standardized the format?

The banks making progress are mostly building alongside their legacy systems rather than trying to transform them. Sidecar architectures, middleware layers, separate digital asset platforms that connect back to the core through adapters. IDC projects that by 2028, 70 to 80 percent of banks will pursue sidecar strategies rather than core replacement. That’s pragmatic. It also tells you how deep the legacy problem runs.

Then there’s compliance. Banks in the US and Canada spend over $60 billion a year on AML compliance alone. The average bank allocates roughly $64 million annually to KYC and AML processes. Regulatory penalties for financial institutions totaled $3.8 billion in 2025. Every new activity, every new rail, every new asset type has to be integrated into a compliance infrastructure that is already stretched, already expensive, and already under scrutiny.

Now layer on programmable money. Stablecoins move 24/7 across borders in seconds. Tokenized deposits can transfer peer-to-peer on public blockchains. Smart contracts can execute transactions without anyone in the loop. Transaction monitoring needs to be real-time, not batch. Sanctions screening needs to happen before settlement, not after. Customer due diligence needs to account for wallet addresses, on-chain identities, and counterparties that may not exist in any traditional database.

Blockchain actually provides a better compliance substrate in certain respects. Every transaction is visible, timestamped, and immutable. Firms like Chainalysis and Elliptic can trace the entire history of a wallet. Programmable compliance, where sanctions screening and transfer restrictions are embedded directly in token contracts, is a growing capability. But getting there requires compliance staff who understand on-chain analytics, technology that can screen blockchain transactions in real time, and policies for questions that don’t have settled answers yet. What counts as a suspicious transaction on a blockchain? When does a wallet address trigger an OFAC obligation? How do you file a SAR for a smart contract interaction? This is solvable, and it’s being solved. But it isn’t free and it isn’t fast, and any bank that underestimates the compliance execution burden is going to have a bad conversation with their examiner.

The operational challenge that probably gets the least attention, though, is time. Programmable money doesn’t sleep. Blockchains run around the clock. Stablecoins settle at 3am on Sunday. Tokenized Treasury funds offer instant redemption day and night. I’ve written about how this changes the economic character of deposits. It also changes the operational character of a bank.

Banks are not built for always on. Settlement systems run during business hours. Treasury desks operate in shifts aligned with market hours. Risk monitoring has overnight gaps. IT maintenance windows assume downtime.

We already have a proof point for how hard this transition is. FedNow launched in July 2023 to enable real-time payments around the clock. Two years later, more than 1,500 financial institutions have joined, reaching about 40 percent of US demand deposit accounts, but still a fraction of roughly 10,000 eligible institutions. Most can only receive instant payments, not send them. Transaction volumes are growing fast ($245 billion in Q2 2025, up from $492 million a year earlier), but operational adoption is lagging well behind the technology.

And FedNow is just real-time payments. Programmable money goes further. If a bank offers tokenized deposits redeemable around the clock, it needs 24/7 liquidity management. If it participates in tokenized Treasury settlement, it needs 24/7 risk monitoring. If a corporate client’s smart contract triggers a payment at 2am Saturday, someone or something needs to be there to make sure it settles correctly, the AML screening happened, the liquidity was available, and the reconciliation is clean.

The T+1 settlement shift in May 2024 offered a preview. The industry prepared for months, and affirmation rates rose from 73 percent to 95 percent ahead of the deadline. But the preparation was enormous, and that was just compressing from T+2 to T+1, during business hours, for a well-understood asset class. Moving to around the clock settlement for tokenized assets is harder by an order of magnitude. The operational investment required is larger than most strategy presentations acknowledge.

All of this is downstream, though, of what I think is the binding constraint: talent. Sixty percent of Fortune 500 companies are now working on blockchain initiatives, according to Coinbase’s 2025 State of Crypto report. They’re all competing for the same small pool of people.

The gap isn’t blockchain developers. Banks can hire those, or partner with firms that have them. The gap is people who understand both worlds. People who can read a Solidity contract and a Basel III capital requirement and understand how they interact. Who can design a smart contract governance framework that satisfies the CTO and the chief risk officer. Who can translate between the language of DeFi and the language of bank regulation.

This talent barely exists because the two industries were built by people who chose opposite sides of a wall. Crypto attracted people who deliberately left traditional finance. Banking was built by people who have never deployed code to a blockchain. The intersection, where all the hardest execution decisions live, is tiny.

Rachel from Anchorage Digital made this point at the recent American Banker’s on-chain conference:

“If you want to move fast, partner with a digital native company and figure out where you want to build internally from there.”

That’s practical advice. But even with a partner, the bank needs internal capability to manage the partnership, evaluate the technology, understand the risks, and make governance decisions. You can outsource the engineering. You can’t outsource the judgment.

And then there’s the problem nobody wants to talk about: the org chart. Programmable money touches payments, treasury, custody, compliance, risk, technology, and client servicing simultaneously. In most banks, those are separate departments with separate budgets, separate leadership, separate incentives, and separate regulatory responsibilities. Getting them to work together on a shared initiative is a coordination problem that makes the technology look simple.

This is why U.S. Bank created a new organizational unit, Digital Assets and Money Movement, reporting to the chief digital officer. It’s why JPMorgan built Kinexys as a dedicated business unit with its own P&L spanning payments, assets, and data. It’s why Carolyn Weinberg at BNY described mapping every post-trade step end to end and reimagining it holistically, rather than letting each department optimize its piece.

Those are structural answers to a structural problem. But most banks, and especially mid-size and community banks, can’t create dedicated digital asset divisions. They have to execute within their existing structure, which means navigating crossvdepartmental politics, competing budget priorities, and leaders who see programmable money as someone else’s problem.

Anyone who approaches this as ‘which products are suitable for tokenization’ is likely to make a first principle error. The right framing is infrastructure, not product. But infrastructure projects require enterprise wide buy in. They require an executive sponsor who can force coordination across departments. They require, to be direct, power.

What’s actually working

I’ve painted a bit of a rough picture, and I want to be clear that banks are executing. Dozens of institutions are live or launching in 2026. This less about whether execution is possible, it’s more about which models work.

From what I can see, three are producing results.

The first is the dedicated unit. JPMorgan’s Kinexys, U.S. Bank’s Digital Assets and Money Movement organization, BNY’s Digital Asset Platform. These create protected space with dedicated leadership, budget, and talent, while maintaining integration points back to the core. This works for large institutions that can afford it. It doesn’t scale down.

The second is the consortium. The Cari Network (KeyBank, Huntington, First Horizon, M&T, Old National), the IBAT community bank consortium, the Texas Bankers Association pilot program, Custodia and Vantage’s integration with the 600 bank Participate network. These pool the execution burden across institutions, sharing infrastructure, compliance frameworks, and operational learning. This is particularly promising for community banks because it gives them access to capabilities they could never build alone.

The third is the partner model. Stablecore pre-integrating digital asset rails into core banking platforms. Anchorage offering white label stablecoin issuance. IO Builders providing tokenization middleware. TruStage building a credit union stablecoin. These let banks adopt programmable money without building deep internal engineering capability. They treat blockchain infrastructure the way banks already treat card processing or payments networks: as something they consume, not build.

Each approach has trade offs. Dedicated units require real investment and can become islands. Consortiums require governance across institutions with different priorities. Partner models create dependencies on third parties, which is exactly what the Basel Committee’s December 2025 principles were designed to address.

But they share something: they scope the problem to something manageable. None of them try to transform the entire bank at once. They pick a use case, build the operational muscle, and expand from there. Crawl, walk, run.

What this means

I’ve been arguing that programmable settlement is poised to reshape bank economics in ways that are structural, not cyclical. The settlement friction subsidy is eroding. Governance over programmable money is hard but tractable. Banks are moving, and the regulatory environment is supportive.

But here’s the thing about execution gaps: they don’t just slow things down. They sort the market. The banks that build operational capability early will be the ones that own the infrastructure layer for programmable money. The ones that wait for perfect conditions will find themselves consuming someone else’s rails, paying someone else’s fees, and depending on someone else’s compliance stack.

That’s the pattern we saw with card processing, with payments networks, with cloud infrastructure. The institutions that built operational capability around the infrastructure became the platforms. Everyone else became the customers.

The programmable money execution gap isn’t just a risk to manage. It’s the mechanism by which the next layer of financial infrastructure will get divided up. The banks that solve the execution problem won’t just survive the transition. They’ll own a piece of the plumbing. The ones that don’t will rent it.

That’s really not a technology question. It’s a power question. And I’m sure it’s being answered right now, by whoever is building operational capability while everyone else is still refining their strategy decks.

References

Bank digital transformation and productivity

• Why Most Digital Banking Transformations Fail — McKinsey

• How Banks Can Supercharge Technology Speed and Productivity — McKinsey

• Digital Banking: Speed, Scale, and the Agentic Arms Race — McKinsey

• Accenture Banking Top 10 Trends 2025

• Digital Transformation Failure Rate 2025 — MeltingSpot

Legacy systems and IT spending

• The True Cost of Legacy Systems: Banking IT Modernisation — Digital Bank Expert

• Core Banking Systems: How Legacy Systems Hold Banks Back — SBS

• Financial Institutions Face Rising IT Budgets — Celent (Retail Banker International)

• 10 Key Areas For Successful Core Banking Modernization — Oliver Wyman

Compliance costs and regulatory fines

• How Much Do Banks Spend on Compliance? 2025 Trends — Fourthline

• The Real Cost of AML Compliance — Lucinity

• Regulatory Penalties for Financial Institutions Skyrocket 417% in H1 2025 — Fenergo

• Global Financial Regulatory Penalties Fall 18% in 2025 — Fenergo

24/7 settlement and real-time payments

• FedNow Service: Two Years of Growth and Innovation — Federal Reserve

• Instant Payments Are a 2025 Priority for Financial Institutions — BAI

• FedNow Reaches 1,500 Banks as Instant Payments Grow — The Financial Brand

• Going Too Fast? Managing Instant Payment Risks — Federal Reserve Community Banking Connections

• Stablecoins Are Redefining Settlement. Are Banks Ready? — Red Compass Labs

T+1 settlement transition

• Securities Operations: Shortening the Standard Settlement Cycle — OCC

• T+1 Settlement: All You Need to Know — J.P. Morgan

• The Cross-Border Implications of T+1 Settlement — TD Securities

Blockchain talent and hiring

• Blockchain Talent Guide 2025: Trends, Skills & Salaries — Blockchain Staffing Ninja

• Crypto and Blockchain Jobs in 2026: Salaries, Compliance, and Hiring Trends — Fintech Careers

• Web3 Hiring Trends January 2026: The Talent Rush — CryptoRecruit

• Talent Shortage in the Blockchain and Crypto Industry — Priority Crypto

ERP and treasury integration

• How Stablecoins Could Fix the ERP-Bank Reconciliation Gap — Trovata

• Implementing Stablecoin Transactions in SAP ERP — JOWUA

• What Treasury and Payments Professionals Need to Know About Stablecoins After the GENIUS Act — AFP

Institutional execution models

• Kinexys — Bank-Led Blockchain Solutions — J.P. Morgan

• U.S. Bank Establishes New Digital Assets and Money Movement Organization — U.S. Bancorp

• How Banks Are Building Finance’s Digital Asset Backbone — Fintech Futures (Sibos 2025)

• U.S. Regional Banks Building Tokenized Deposit Network on ZKsync (Cari Network) — CoinDesk

• How Stablecore Is Pulling U.S. Community Banks onto Blockchain Rails — Disruption Banking

Former SEC, JPMorgan exec Brett Redfearn joins Securitize as president

Former SEC and JPMorgan executive Brett Redfearn joined Securitize as president, bringing regulatory expertise to the tokenization firm that controls roughly 70% of the U.S. market and works with BlackRock and Apollo. This appointment signals institutional confidence in tokenized securities infrastructure.

https://www.theblock.co/post/396875/former-sec-jpmorgan-exec-brett-redfearn-joins-securitize

Swiss banks to test possible uses for Swiss franc stablecoin

UBS partnered with five major Swiss banks to test use cases for a Swiss franc-pegged stablecoin in a regulatory sandbox, exploring blockchain-based settlement for traditional banking operations. This initiative demonstrates major European banks’ commitment to digital currency experimentation.

https://www.reuters.com/business/finance/swiss-banks-test-use-cases-swiss-franc-stablecoin-2026-04-08/

Circle Rolls Out Full Stack Stablecoin Settlement Platform for Banks and Payment Firms

Circle launched its CPN Managed Payments platform, allowing banks and payment firms to offer stablecoin settlement without directly managing digital assets infrastructure. This full stack solution addresses a key barrier to traditional finance adoption of blockchain based payments.

https://finance.yahoo.com/markets/crypto/articles/circle-rolls-full-stack-stablecoin-183300070.html

Regulation & Policy

Treasury Proposes Rule to Implement the GENIUS Act’s Requirements to Counter Illicit Finance

Treasury’s FinCEN proposed anti-money laundering rules for stablecoin issuers under the GENIUS Act, requiring bank-like compliance programs including transaction monitoring and blocking capabilities. This represents a major step toward comprehensive federal stablecoin regulation.

https://home.treasury.gov/news/press-releases/sb0435

Dubai clarifies token issuance rules for RWAs and stablecoins

Dubai’s financial regulator issued detailed guidance categorizing token launches into three buckets, with heightened disclosure and governance standards for stablecoins and real-world assets. This clarifies regulatory expectations for digital asset issuers in the emirate.

https://cointelegraph.com/news/dubai-vara-clarifies-token-issuance-rules

White House says stablecoin yield won’t hurt bank deposits

The White House Council of Economic Advisers concluded that banning stablecoin yield products would boost community bank lending by only 0.02%, undermining banking industry arguments against stablecoin competition. This analysis strengthens the case for allowing yield-bearing stablecoins.

https://www.whitehouse.gov/research/2026/04/effects-of-stablecoin-yield-prohibition-on-bank-lending/

Research & Analysis

FEDS Note: Stablecoins in 2025: Developments and Financial Stability Implications

Federal Reserve economists published analysis showing stablecoins grew 50% in market capitalization during 2025, with increased transaction volume and DeFi usage raising financial stability questions. The research examines implications for monetary policy and banking system stability.

https://www.federalreserve.gov/econres/notes/feds-notes/stablecoins-in-2025-developments-and-financial-stability-implications-20260408.html

Denis Beau: Stablecoins - what strategic choices for Europe?

Bank of France Deputy Governor Denis Beau outlined strategic choices for Europe’s stablecoin regulatory approach, emphasizing the need for clear frameworks that balance innovation with financial stability. His remarks signal continued European focus on comprehensive digital currency oversight.

https://www.bis.org/review/r260331b.htm

Stablecoin Trading Volume Could Skyrocket to $1.5 Quadrillion by 2035: Chainalysis

Chainalysis projects stablecoin trading volume could reach $1.5 quadrillion by 2035, driven by generational wealth transfer and point-of-sale adoption that could eclipse traditional payment networks. This forecast highlights stablecoins’ potential to fundamentally reshape global payments infrastructure.

https://decrypt.co/363685/stablecoin-trading-volume-skyrocket-1-5-quadrillion-2035-chainalysis

JPMorgan’s Jamie Dimon sees ‘new competitors’ from blockchain, stablecoins

JPMorgan CEO Jamie Dimon warns in his annual shareholder letter that new blockchain and stablecoin competitors are reshaping finance as the bank scales its own network.

https://www.jpmorganchase.com/ir/annual-report/2025/ar-ceo-letters

BitGo Prime Launches Financing Offering

BitGo Prime launches unified financing offering providing institutional clients with collateralized borrowing and lending capabilities integrated within its digital asset platform.

https://www.crowdfundinsider.com/2026/04/271045-bitgo-prime-launches-financing-offering

Tokenized Stocks Take Next Step With First On-Chain Vote for Galaxy Shareholders

Galaxy shareholders will participate in the first on-chain proxy voting for tokenized shares via Broadridge’s new blockchain-enabled corporate governance platform.

https://decrypt.co/363432/tokenized-stocks-first-on-chain-vote-galaxy-shareholders

Figure Technology’s tokenized credit platform could help double stock price: Bernstein

Bernstein suggests Figure Technology’s tokenized credit platform could double the company’s stock price as loan volumes surge despite recent market volatility.

https://cointelegraph.com/news/figure-stock-bernstein-loan-growth-tokenization-outlook

Research & Analysis

IMF charts cautious tokenization path amid US permissionless push

IMF’s Financial Counsellor publishes a note arguing tokenization represents a fundamental reconfiguration of trust, settlement and risk management in finance, not merely a technology upgrade.

https://www.ledgerinsights.com/imf-charts-cautious-tokenization-path-amid-us-permissionless-push

Who owns crypto in the euro area? Drivers of crypto adoption, payment use, and its interaction with fiat cash

ECB survey of 39,507 adults across 17 euro-area countries finds crypto-asset owners are typically younger, male, and financially active, with mixed preferences for both privacy and speed in payments.

https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3215~2034b1e0ae.en.pdf

Tokenized Money

Polymarket to Launch Stablecoin, Order Book Overhaul in Prediction Market Upgrade

Polymarket announces major platform overhaul including launch of its own stablecoin and rebuilt order book infrastructure to improve user experience and reduce external dependencies.

https://decrypt.co/363437/polymarket-launch-stablecoin-prediction-market-upgrade

Argentine banks testing JPMorgan’s JPM Coin to speed up settlements: Report

Argentine banks are testing JPMorgan’s JPM Coin to accelerate cross-border settlement times, marking expansion of the bank’s tokenized deposit solution in Latin America.

https://www.tradingview.com/news/cointelegraph:a80eca0af094b:0-argentine-banks-testing-jpmorgan-s-jpm-coin-to-speed-up-settlements-report/

LG CNS to lead next phase of Bank of Korea’s digital currency initiative

LG CNS selected to lead the next phase of Bank of Korea’s Project Hangang digital currency initiative, advancing the central bank’s tokenized deposit testing program.

https://www.koreatimes.co.kr/amp/business/companies/20260406/lg-cns-to-lead-next-phase-of-bank-of-koreas-digital-currency-initiative

I think that’s right. But I also think there’s a conversation that’s probably not happening loudly enough, and it’s the one that matters most for banks entering this space: governance.

Not governance in the abstract sense, not “we need another committee.” Governance in the operational sense: who controls the logic that moves money? Who can change it? What happens when it breaks? What does “it broke” even mean when the code executed exactly as written, but the outcome wasn’t what anyone intended?

In my experience, when banks get this wrong, it’s not the technology that fails. It’s the governance around the technology.

When policy lives in code

I don’t think the industry has fully internalized the shift that programmable money introduces.

In traditional banking, policy lives in documents. A lending policy says “don’t extend credit beyond X.” A treasury policy says “maintain liquidity reserves of Y.” A compliance policy says “file a SAR when you see Z.” Humans interpret these policies, apply judgment, and execute decisions. The gap between policy and execution is filled by people.

In a programmable system, policy lives in code. A smart contract doesn’t interpret a lending threshold, it enforces it. A tokenized deposit doesn’t wait for a treasury desk to assess liquidity, the redemption logic is baked into the contract. A compliance rule embedded in a token’s transfer function doesn’t require a human to flag a suspicious transaction, it either permits the transfer or it doesn’t.

This is powerful. It removes human error, compresses execution time, and creates an auditable record of every action. Of course, that’s the upside everyone talks about.

The downside is that the code becomes the single point of truth. If the logic is wrong, the system doesn’t produce a memo flagging the error for senior review. It executes the wrong thing, immediately, at scale, with finality.

Funny thing is that this isn’t hypothetical. The crypto ecosystem has spent the last five years producing an extraordinary, and extraordinarily expensive, dataset on what happens when programmable logic operates without adequate governance.

The $3.4 billion dataset

In 2025, crypto hacks and exploits resulted in over $3.4 billion in losses, according to Chainalysis, slightly above the $3.3 billion lost in 2024. A single incident, the Bybit breach in February 2025, accounted for $1.5 billion of that total. The FBI attributed it to North Korea’s Lazarus Group. They didn’t exploit a smart contract vulnerability in the traditional sense. They compromised the transaction approval process, the governance layer, by injecting malicious code into the signing interface of Safe{Wallet}, a widely used multi-signature wallet. The signers saw one thing on their screens. The contract executed another.

Multi-sig wallets exist specifically as a governance control, requiring multiple independent approvals before funds move. The technology worked exactly as designed. The governance around it, how signers verified what they were approving, failed completely. $1.5 billion moved in a single transaction because the human verification process was compromised while the cryptographic verification process was technically sound.

The Bybit hack is the most dramatic example, but it’s far from the only one. Halborn’s Top 100 DeFi Hacks report found that off-chain attacks, meaning compromised accounts, phished credentials, manipulated interfaces, accounted for 80.5% of stolen funds in 2024. Only 19% of hacked protocols used multi-sig wallets. Just 2.4% employed cold storage. The technology to prevent these losses existed, the governance to deploy and maintain it didn’t.

Across DeFi, access control vulnerabilities, not exotic cryptographic flaws but basic permission errors, accounted for $953 million in losses in 2024 alone, making them the number one cause of smart contract exploitation for the second consecutive year according to OWASP’s Smart Contract Top 10.

Access control. Permissions. Who can call which function. This is governance 101, and the programmable money ecosystem is still getting it wrong.

Why audits aren’t enough

The natural response from a bank risk officer hearing these numbers is no doubt “We’ll audit the smart contracts.” Fair enough. But the data on audits is also sobering.

Smart contract audits grew by over 40% in 2025, driven by regulatory pressure and institutional adoption. Yet audited protocols continue to be exploited. Euler Finance was reviewed by six different security firms, including Certora, Halborn, Solidified, ZK Labs, Sherlock, and Omniscia, before a $197 million flash loan exploit in March 2023. Sherlock, one of the auditors, acknowledged responsibility for missing the vulnerability and paid a $4.5 million claim. Ronin Bridge was exploited in August 2024, its second major breach, because a contract was deployed without the latest audit-recommended initialisation, leaving a critical parameter set to zero. The first Ronin breach, in 2022, cost $600 million.

The gap isn’t in the quality of audits, it’s in what audits cover. A smart contract audit reviews code correctness, so does this function do what it’s supposed to? What it doesn’t typically assess is business logic risk, operational process, governance over upgrades, or the interaction between the contract and everything around it. Euler’s auditors reviewed the code. The exploit targeted a business logic flaw that only manifested through a specific sequence of flash loan transactions that the auditors hadn’t modelled.

This is the equivalent of a bank conducting a thorough credit risk review of a loan portfolio while ignoring the operational risk of how loans are originated and serviced. The analysis is rigorous within its scope. The scope is too narrow.

For banks entering the programmable money space, the lesson isn’t “don’t trust audits.” It’s that audits are a necessary component of a governance framework, not a substitute for one. The OCC’s July 2025 joint statement with the Fed and FDIC on crypto-asset safekeeping makes this explicit: banks must demonstrate “effective governance and subject-matter expertise across all levels of the enterprise.” That’s not a line item on an audit report. That’s an organizational capability.

You can’t patch what’s immutable

Smart contracts on public blockchains are, by default, immutable. Once deployed, the code can’t be changed. This is a feature for trust, and a disaster for operational management. Banks can’t operate with code they can’t fix.

So most institutional implementations use upgradeable proxy patterns, where the contract’s logic can be swapped out by an authorized party. This solves one problem and creates another: who authorizes upgrades? What’s the testing and approval process? What happens if an upgrade introduces a new vulnerability?

The Ronin Bridge exploit happened precisely because an upgrade was deployed without proper initialization. The upgrade mechanism, the governance mechanism, was the attack surface. Same technology, different context, catastrophic outcome.

When the data feed lies, the contract doesn’t care

Many smart contracts depend on external data feeds: asset prices, interest rates, reference data, all provided by oracles. If the oracle delivers bad data, the contract executes faithfully on wrong information. Oracle manipulation caused $52 million in losses across 37 incidents in 2024, and attacks surged 31% year over year.

For a bank running tokenized repo or automated collateral management, an oracle failure isn’t an IT incident. It’s a potential balance sheet event. Who selects the oracles? What’s the fallback if a feed fails? How do you reconcile a smart contract’s on-chain state with your offchain books when the oracle data was wrong for 45 minutes?

Traditional settlement systems have reconciliation breaks all the time, and there are entire teams dedicated to resolving them. Programmable settlement with atomic finality doesn’t give you the same grace period.

The cascading failure nobody modeled

The FSB flagged this one most explicitly in its October 2024 report on tokenization risks. Programmability and composability, the ability for one smart contract to interact with another,

Your contract talks to another contract, which talks to another contract, and a failure three layers down cascades back to you in ways nobody modelled. Cross-chain bridges, which connect different blockchains, account for 40% of all Web3 hacks and over $2.8 billion in cumulative losses, precisely because they create complex interdependencies across systems with different security assumptions.

The FSB put it directly: roles that traditional finance separates, issuance, custody, secondary trading, can be “blurred and intermingled in tokenized systems.” That blurring is a governance gap.

Who actually controls the protocol?

In DeFi, protocol governance is typically managed through token holder voting. In July 2024, a group called the Golden Boys pushed through a Compound DAO proposal directing $24 million in COMP tokens to a vault they controlled. The proposal passed 682,191 to 633,636, with voter turnout of just 4–5% of total token supply. In April 2025, a GreenField DAO attacker flash borrowed 9 million governance tokens, passed a malicious proposal, and drained $31 million from the treasury in a single block.

Banks obviously won’t be running DAOs. But they will be participating in multi-party tokenized platforms, shared ledgers, consortium networks, industry utilities, where governance decisions about protocol rules, upgrade schedules, and risk parameters affect every participant. Who votes? How are changes approved? What’s the dispute resolution process when a smart contract executes correctly but produces an outcome one party considers unfair? The technology doesn’t answer these questions.

Banks have the muscle. They haven’t pointed it at the right problems yet.

Banks are actually very good at governance. Operational risk management, three lines of defence, model risk governance, vendor risk management, business continuity planning. These are mature disciplines. The Basel framework, the OCC’s supervisory expectations, the UK’s operational resilience regime. The scaffolding exists.

In December 2025, the Basel Committee published its Principles for the Sound Management of Third Party Risk, explicitly addressing the growing dependence on technology vendors and fintech firms. The framework covers the full lifecycle of third-party arrangements: rigorous governance by the board and senior management, maintenance of a comprehensive risk management framework aligned with operational risk and resilience standards, and heightened expectations for critical services. The EU’s Digital Operational Resilience Act, DORA, went live in January 2025, requiring documented ICT risk frameworks, incident reporting within hours, regular resilience testing, and formal oversight of technology vendors.

These frameworks weren’t designed for programmable money. But the principles translate directly. The problem is that most banks haven’t yet mapped them onto the specific risks that smart contracts and tokenized systems introduce.

There’s a historical parallel worth considering. When banks started trading derivatives in the 1980s and 1990s, they didn’t have governance frameworks for the instruments. They had governance frameworks for risk. The work was in the mapping: applying what they knew about counterparty exposure, netting, and portfolio risk to a new instrument class. The same thing happened with algorithmic trading, and again with cloud migration. The governance wasn’t built from scratch. It was translated.

Programmable money is the same kind of translation problem. But the speed makes it harder. Consider the CrowdStrike outage in July 2024. A single content-configuration update from a cybersecurity vendor disabled 8.5 million Windows systems worldwide, including bank payment platforms and ATM networks. The root cause wasn’t a sophisticated attack, it was a failed quality-assurance process at a critical third-party vendor. The OCC subsequently found that half of the largest US banks lack a strong grasp of operational risks.

Now imagine that kind of concentration risk in programmable money infrastructure. A shared smart contract library used by multiple tokenized deposit systems. An oracle provider feeding data to every bank’s automated collateral management. A blockchain network where a consensus failure halts settlement for all participants simultaneously. The operational risk isn’t new in kind, it’s new in speed and scope. When code executes in milliseconds and settlement is atomic, the window between “something went wrong” and “irreversible loss” is essentially zero.

What running this safely actually takes

I don’t think the answer can be to slow down. I’ve written before about how the settlement friction subsidy that funds cheap deposits is eroding whether banks participate or not. But I do think the industry needs to be more honest about what safe adoption requires.

Smart contract risk needs its own governance framework, separate from but integrated with existing operational risk. It needs to cover code development, testing, audit, deployment, upgrade authority, monitoring, and incident response. The Basel Committee’s third-party risk principles provide a starting point, but smart contracts aren’t just third-party services. They’re automated decision-making systems that execute with finality. I’m increasingly convinced that model risk management, specifically the Fed’s SR 11-7 guidance, is a closer analogue than traditional vendor risk. A smart contract is, functionally, a model: it takes inputs, applies logic, and produces outputs that drive financial outcomes. It should be governed accordingly.

Resilience testing needs to include smart contract failure scenarios. Not just “what if the blockchain goes down,” which is the easy scenario. What if an oracle feeds stale data for an hour? What if a token’s transfer function blocks a legitimate transaction? What if a contract upgrade introduces an unintended interaction with another contract in the same ecosystem? DORA already requires threat-led penetration testing for critical systems. Programmable money systems should be held to the same standard, and the scenarios need to be designed by people who understand both the technology and the business logic it’s encoding.

The industry needs shared standards for governance of multi-party tokenised platforms. When banks join consortium networks, and they will because the economics of shared infrastructure are compelling, they need frameworks that address upgrade authority, dispute resolution, liability allocation, and incident coordination. This is a legal and operational design problem, and it needs to be solved before the platforms scale, not after.

And banks need people who can work across both domains. People who can read a Solidity contract and a Basel III capital requirement and understand how they interact. This talent barely exists today, and it’s the tightest constraint on safe adoption.

Banks are moving anyway

This is genuinely, structurally hard. The governance frameworks banks have built over decades, battle tested through financial crises, refined across three lines of defence, don’t map cleanly onto smart contracts and tokenized systems. Nobody has a complete answer. Not the regulators, not the consultants, not the technology vendors.

But banks are moving anyway. I think that matters more than having the perfect framework.

JPMorgan’s Kinexys has processed over $2 trillion in notional value on a permissioned network with centralised governance, controlling the participants, the upgrade process, who can call which function. That’s not a shortcut. It’s a legitimate design choice that manages risk by limiting scope, and it’s proving the economics work at scale.

Citi moved its tokenized cash service from pilot to live production in late 2024, processing multimillion dollar transactions for institutional clients across US dollars, euros, sterling, and Singapore and Hong Kong dollars. HSBC is already running tokenized deposits in Singapore, Hong Kong, the UK and Luxembourg, with US and UAE rollouts planned for the first half of 2026. BNY launched a tokenized deposit service in early 2026, with Baillie Gifford, Circle, Citadel Securities, Galaxy, Ripple, Invesco and WisdomTree among the early participants. Goldman Sachs built a tokenization platform, partnered with BNY to enable the first tokenized MMF subscriptions in the US, and is now spinning the platform out as an independent entity so it can scale across the industry.

And it’s not just the G-SIBs. In March 2025, Custodia Bank and Vantage Bank issued America’s first bank-issued stablecoin on a permissionless blockchain, Ethereum mainnet, using ERC-20 tokens backed by tokenized demand deposits. They walked through the full lifecycle: mint, transfer into self-custody, business to business transaction outside the banking system, transfer back, redemption into dollars. They did it while complying with BSA/AML/OFAC requirements, which meant building documentation, policies and procedures from scratch. Nobody had done it before.

Five regional banks, KeyBank, Huntington, First Horizon, M&T, and Old National, have joined the Cari Network to move tokenized deposits on ZKsync infrastructure anchored to Ethereum, with a pilot rollout planned for Q3 2026. The Independent Bankers Association of Texas launched a consortium of community banks building a shared tokenized deposit network. The Texas Bankers Association is offering pilot access to member banks through its Innovation Magnet programme. U.S. Bank created an entirely new organisational unit, Digital Assets and Money Movement, to build stablecoin issuance, crypto custody, and tokenization capabilities.

Meanwhile, infrastructure providers like Stablecore are pre-integrating digital asset rails into existing core banking platforms, so community banks can launch stablecoin payments and tokenized deposits without internal engineering teams. TruStage, the financial services arm of the credit union movement, announced a fully reserved stablecoin for credit unions, with a pilot launch in the first half of 2026.

None of these institutions waited for perfect governance. They started with what they could control, permissioned networks, known counterparties, existing regulatory relationships, and began building the operational muscle for programmable money in a contained environment. Kinexys didn’t launch with public-chain composability risk. Custodia didn’t try to solve oracle dependency in its first transaction. Cari Network chose a private Layer 2 anchored to Ethereum, not raw mainnet deployment. Each of these is a deliberate design choice that scopes the governance problem to something manageable.

The harder question, and I think this is the one that’s going to define the next few years, is what happens as the ecosystem moves further onto public infrastructure. The tokenized Treasury market, the instant redemption MMFs, the stablecoin settlement layer, much of that lives on Ethereum, Solana, Avalanche. Public chains introduce every governance problem I’ve described: upgrade authority is diffuse, oracle dependency is real, composability is the whole point, and there’s no single party you can hold accountable when something goes wrong. The Basel Committee’s third-party risk principles weren’t designed for systems where the “third party” is a decentralized network with no legal entity behind it. DORA sets the right expectations for resilience testing, but the specific failure scenarios for public-chain programmable money haven’t been codified anywhere.

I don’t have a clean answer for that. I’m not sure anyone does just now. But I think the banks that are moving now, building governance for the permissioned end, learning what breaks, developing the institutional muscle, are the ones that will be best positioned when the public-chain question can no longer be deferred. The crypto ecosystem’s $3.4 billion a year in governance failures has produced a detailed map of what goes wrong: access control, upgrade authority, oracle dependency, composability risk, multi-party governance. These are known problems with known shapes. Banks have the institutional discipline to address them. What they haven’t had, until recently, is enough operational experience with the technology to know which of their existing frameworks apply and which need to be rebuilt.

That’s what’s being built right now. Not perfectly, not completely, but the pace is accelerating. The frameworks always get built in motion. That’s how derivatives governance worked. That’s how algo trading oversight worked. That’s how cloud migration worked.

The ones that treat programmable money as a technology problem with a governance appendix will learn the same lesson DeFi has been teaching at $3.4 billion a year.

References

Crypto losses and security data

• Crypto Hacks Hit $3.4 Billion in 2025 — Chainalysis (The Block)

• Crypto Losses of $1.7 Billion Already Surpass 2024 Total — Immunefi (Decrypt)

• The Top 100 DeFi Hacks Report 2025 — Halborn

• Year in Review: The Biggest DeFi Hacks of 2025 — Halborn

• Smart Contract Security Risks and Audits Statistics 2025 — CoinLaw

• 2026 Software Security Report: Audited Applications Account for Only 10.8% of Exploit Losses (PRWeb)

Specific incidents

• FBI Confirms North Korea Responsible for $1.5 Billion Bybit Hack — IC3/FBI

• The Bybit Hack — In-Depth Technical Analysis — NCC Group

• The Bybit Heist and the Future of U.S. Crypto Regulation — CSIS

• Explained: The Ronin Network Hack (August 2024) — Halborn

• $24 Million Compound Finance Proposal Passed by Whale Over DAO Objections — The Block

• Key Takeaways from the Golden Boys’ Attack on Compound DAO — Cointelegraph

• Smart Contract Oracle Manipulation: The $8.8M Data Poisoning (Medium)

• Euler Finance Flash Loan Attack Explained — Chainalysis

• Euler Finance Attack: How It Happened, and What Can Be Learned — Cointelegraph

OWASP and vulnerability classification

• OWASP Smart Contract Top 10: 2026 — OWASP Foundation

• OWASP SC Top 10 (2025) Breakdown — Resonance Security

Regulatory and governance frameworks

• Principles for the Sound Management of Third-Party Risk — Basel Committee (December 2025)

• Basel Committee Approves Final Principles on Third-Party Risks — BIS Press Release (November 2025)

• Federal Banking Regulators Issue Guidance on Risk Management for Crypto-Asset Safekeeping (July 2025) — Greenberg Traurig

• OCC Confirms Bank Authority to Engage in Riskless Principal Crypto-Asset Transactions (December 2025)

• The State of Play in Banking and Digital Assets — Sidley Austin (January 2026)

• Digital Operational Resilience Act (DORA) Explained — InnReg

Financial stability and systemic risk

• The Financial Stability Implications of Tokenisation — FSB (October 2024)

• FSB Finds Significant Gaps in Implementation of Crypto Recommendations (October 2025)

• The Rise of Tokenised Money Market Funds — BIS Bulletin No. 115

• Tokenisation in the Context of Money — BIS CPMI

Institutional adoption and bank initiatives

• JPMorgan’s Tokenized Dollars Are Quietly Rewiring Wall Street — CoinDesk

• Kinexys — Bank-Led Blockchain Solutions — J.P. Morgan

• Citi Is Laying Plans for Crypto Supremacy — American Banker

• Citi Targets 2026 Launch for Crypto Custody Service — CNBC

• HSBC to Roll Out Tokenized Deposits for U.S., UAE Clients in 2026

• BNY Launches Tokenized Deposits in Digital Assets Expansion — Bloomberg

• BNY and Goldman Sachs Launch Tokenized Money Market Funds Solution — Goldman Sachs

• Goldman Sachs Focuses on Spinning Out Tokenization Platform — Markets Media

• Custodia Bank and Vantage Bank Issue America’s First Bank-Issued Stablecoin on a Permissionless Blockchain — PR Newswire

• Custodia’s Tokenized Deposit to Be Used in 600-Bank Network — American Banker

• U.S. Regional Banks Building Tokenized Deposit Network on ZKsync (Cari Network) — CoinDesk

• US Banks Build Tokenized Deposit Network to Guard Their Turf — Bloomberg

• IBAT Leads Push for Stablecoins and Tokenized Deposits — Independent Bankers Association of Texas

• TBA to Offer Pilot Access for Tokenized Deposit Capabilities — Texas Bankers Association

• U.S. Bank Establishes New Digital Assets and Money Movement Organization — U.S. Bancorp

• How Stablecore Is Pulling U.S. Community Banks onto Blockchain Rails — Disruption Banking

• TruStage Launches Stablecoin for Credit Unions

• Audited, Tested, and Still Broken: Smart Contract Hacks of 2025 — Coinmonks

DeFi governance failures

• How DAOs Failed to Deliver on Their Original Promise — Antonio Lopez (March 2026)

• Emerging Smart Contract Vulnerabilities in 2025: Flash Loans, Cross-Chain Bridges, and Governance Exploits (Medium)

• Compound’s $24M DAO Heist: How Governance Theater Enabled the Golden Boys — Medium

Operational risk and CrowdStrike

• CrowdStrike Outage: The Impact on Banks and Payments — Juniper Research

• Key Implications of the CrowdStrike Outage — International Banker

• What Banks Can Learn From the CrowdStrike Outage — RMA

BitGo launches stablecoin minting and redemption for institutions

BitGo launches institutional stablecoin minting and redemption platform targeting market makers, liquidity providers, banks, exchanges, and asset managers as demand grows for enterprise-grade infrastructure.

https://www.theblock.co/post/396152/bitgo-stablecoin-minting-redemption-institutions

Kulipa raises $6.2m for stablecoin-native card issuing infrastructure platform

Paris-based Kulipa raised $6.2 million in seed funding for its stablecoin-native card issuing infrastructure platform. The funding signals growing institutional investment in stablecoin payment rails for everyday commerce.

https://www.finextra.com/newsarticle/47529/kulipa-raises-62m-for-stablecoin-native-card-issuing-infrastructure-platform

Ripple Launches Treasury Management System with Native Digital Asset Capabilities

Ripple launches treasury management system allowing CFOs to manage fiat and digital assets in a single platform, integrating native digital asset capabilities for corporate treasury operations.

https://decrypt.co/363002/ripple-launches-treasury-management-system-with-native-digital-asset-capabilities

Beyond T-bills: OpenEden introduces tokenized high-yield corporate bond

OpenEden introduces tokenized high-yield corporate bond product, expanding beyond Treasury bills as institutional appetite grows for diversified tokenized fixed income offerings.

https://www.coindesk.com/business/2026/04/02/beyond-t-bills-openeden-introduces-tokenized-high-yield-corporate-bond

Regulation & Policy

Treasury outlines state v. federal stablecoin oversight balance

U.S. Treasury releases first proposed rule under the GENIUS Act, establishing state-federal framework for stablecoin oversight with guardrails against regulatory arbitrage. Opens 60-day public comment period for smaller issuers under $10B.

https://www.americanbanker.com/news/treasury-outlines-state-v-federal-stablecoin-oversight-balance

Barr, Brief Remarks on Stablecoins

Fed Governor Barr delivers speech warning of stablecoin risks to financial stability, citing ‘long and painful history of private money’ and emphasizing need for strong federal oversight including anti-money laundering controls.

https://www.federalreserve.gov/newsevents/speech/barr20260331a.htm

Coinbase CLO Grewal says Clarity Act ‘very close’ to reaching deal on stablecoin yield

Coinbase CLO Paul Grewal says lawmakers are ‘very close’ to reaching compromise on stablecoin yield provisions in the Clarity Act, dismissing banking industry concerns about deposit flight as final negotiations continue.

https://www.theblock.co/post/396170/coinbase-clo-grewal-clarity-act-very-close

Hong Kong misses March target for first stablecoin licenses

Hong Kong authorities miss March target for issuing first stablecoin licenses, pushing applicants to refine application details before granting approvals under the new regulatory framework.

https://www.theblock.co/post/396057/hong-kong-misses-march-target-first-stablecoin-licenses

Research & Analysis

Stablecoin Market to Hit $2 Trillion in 2028 Even as Velocity Doubles: Standard Chartered

Standard Chartered forecasts stablecoin market will reach $2 trillion by 2028 despite doubled velocity driven by USDC’s expanding use cases in traditional finance and AI payments, signaling institutional adoption momentum.

https://decrypt.co/362882/stablecoin-market-2-trillion-2028-velocity-doubles-standard-chartered

Liquidity, not novelty, determines tokenization’s value

Analysis argues that liquidity, not novelty, determines tokenization’s value, with high-demand assets enabling continuous settlement and network effects. The research suggests programmability on dollars and bonds compresses financial frictions where trillions already flow.

https://cointelegraph.com/news/liquidity-determines-tokenization-value

BIS, IMF researchers find stablecoins already impact traditional FX rates

BIS and IMF researchers found that stablecoins already impact traditional foreign exchange rates, demonstrating their growing influence on global financial markets. This research validates concerns about stablecoins’ systemic importance to monetary policy transmission.

https://www.ledgerinsights.com/bis-imf-researchers-find-stablecoins-already-impact-traditional-fx-rates/

Swift to run live tokenized deposit payments on blockchain MVP in 2026

Swift announces plans for live tokenized deposit payments on blockchain MVP in 2026, advancing institutional settlement infrastructure for on-chain banking operations.

https://www.ledgerinsights.com/swift-to-run-live-tokenized-deposit-payments-on-blockchain-mvp-in-2026/

Forex startup OpenFX raises $94 million to expand stablecoin powered cross-border payments

Foreign exchange startup OpenFX raises $94 million to expand stablecoin-powered cross-border payment infrastructure, targeting institutional FX market inefficiencies.

https://www.coindesk.com/business/2026/03/31/forex-startup-openfx-raises-usd94-million-to-expand-stablecoin-powered-cross-border-payments

South Korea’s KB Card taps Avalanche for ‘hybrid’ stablecoin credit card

South Korea’s KB Card partners with Avalanche to develop hybrid stablecoin credit card system, enabling customers to use digital assets on existing payment infrastructure.

https://www.theblock.co/post/395846/kb-card-taps-avalanche-stablecoin

Regulation & Policy

Eurosystem sets out comprehensive strategy for future of European payments

ECB publishes comprehensive payments strategy for the Eurosystem addressing digitalization and distributed ledger technology, setting dual-track approach for upgrading current systems while preparing for tokenized future.

https://www.ecb.europa.eu//press/pr/date/2026/html/ecb.pr260331~04561d8476.en.html

Chairman Selig Announces Formation of New Innovation Task Force

CFTC Chairman announces formation of new Innovation Task Force to address emerging financial technologies and market structure developments in derivatives markets.

https://www.cftc.gov/PressRoom/PressReleases/9201-26

Research & Analysis

Payment Stablecoins and Cross Border Payments: Benefits and Implications for Monetary Policy Implementation

Federal Reserve publishes detailed analysis of how payment stablecoins affect cross-border payments and monetary policy implementation under the new regulatory framework. The research examines implications for central bank operations and financial stability.

https://www.federalreserve.gov/econres/notes/feds-notes/payment-stablecoins-and-cross-border-payments-benefits-and-implications-for-monetary-policy-20260330.html

‘Unstable velocity’: Standard Chartered says stablecoin usage rising faster than expected as new use cases emerge

Standard Chartered maintains $2 trillion stablecoin market forecast by 2028 despite accelerating turnover from AI payments and traditional finance adoption, noting potential demand caps from increased velocity.

https://www.theblock.co/post/395867/unstable-velocity-standard-chartered-says-stablecoin-usage-rising-faster-than-expected-as-new-use-cases-emerge

Faster settlement may make for poorer markets

Analysis warns that atomic settlement’s instant capital requirements per trade could reduce market efficiency by eliminating netting benefits while concentrating power among liquidity coordinators.

https://cointelegraph.com/news/faster-settlement-poorer-markets

Tokenized Money

Piero Cipollone: The digital euro: preparing for a potential launch

ECB Executive Board member delivers keynote on digital euro preparations, outlining potential launch framework for Europe’s central bank digital currency initiative.

https://www.ecb.europa.eu//press/key/date/2026/html/ecb.sp260324~66f71f7577.en.html

That distinction matters, because the banking industry’s current fight is about what happens around the edges of it. The ABA and all 52 state bankers associations have written to Congress arguing that exchanges like Coinbase are circumventing the spirit of the law by paying yield on stablecoin balances held on their platforms. The issuers aren’t paying it, the exchanges are. ICBA is pushing the same line, framing it explicitly as a deposit protection issue, community banks make 60% of US small business loans under $1 million, and that lending capacity depends on stable deposit funding. The banking lobby wants the loophole closed, and they may well succeed.

I just don’t think it solves the problem. Even if you close every yield loophole, the structural threat to bank funding models isn’t yield on stablecoins, it’s the elimination of the friction that makes deposits cheap in the first place.

That’s what this article is about.

The settlement friction subsidy

Here’s how bank funding actually works, stripped to its essentials. Cash sits in accounts. It moves slowly, during business hours, through batch queues, between payment cycles. That slowness isn’t a bug. For banks, it’s a feature. Every hour money sits idle in a non-interest bearing account, the bank earns a subsidy. It funds loans at zero cost with capital that’s going nowhere.

This is the foundation of net interest margin.

At the end of 2021, non-interest bearing deposits accounted for roughly 30% of all bank deposits in the US. That’s nearly a third of total funding that costs the bank nothing. Since then, the share has fallen to around 23% as depositors shifted to interest-bearing alternatives in a higher rate environment. The industry’s NIM recovered to 3.39% in Q4 2025, the highest since 2019, but that recovery was driven primarily by funding costs falling faster than asset yields after the Fed’s rate cuts. The underlying deposit mix has shifted permanently.

And that shift happened before programmable settlement entered the picture.

The 1980s rhyme

We’ve seen a version of this before. In the late 1970s, Regulation Q capped the interest banks could pay on savings accounts at 5.25%, while market rates were north of 12%. Money market mutual funds exploited that gap. By 1980, MMFs held $77 billion in assets, about 3.5% of total bank and thrift deposits. The banking industry fought back, lobbied for the Garn-St. Germain Act in 1982, got permission to offer Money Market Deposit Accounts, and eventually saw Reg Q eliminated entirely by 1986.

Banks adapted. Deposits didn’t disappear. Congress gave banks permission to offer Money Market Deposit Accounts, and the industry competed aggressively for funding. Some didn’t survive the transition, the S&L crisis wiped out over a thousand institutions, many of which couldn’t absorb the higher cost of deposits. The survivors consolidated, expanded into new lending categories, and eventually rebuilt margins. But MMFs didn’t vanish when the regulatory gap closed. They kept growing, because they had structural cost advantages that survived deregulation. Today they hold over $6 trillion.

The lesson from the 1980s isn’t that disintermediation kills banks. It doesn’t. Banks are resilient and adaptive. The lesson is that once capital learns it has options, it doesn’t forget. The cost of retaining deposits went up permanently, and the industry had to restructure around that reality. Some banks thrived. Many didn’t.

I think stablecoins and programmable settlement are about to replay that dynamic but at a different layer of the stack.

What programmable settlement actually changes

The MMF fight was about yield. Depositors wanted better returns, and they found them outside the banking system. The stablecoin fight looks similar on the surface, which is why the banking lobby is focused on closing yield loopholes at exchanges.

But the deeper shift isn’t about yield. It’s about velocity.

When a corporate treasurer can move capital in minutes rather than days, the economic character of a deposit changes. Capital that used to sit in a non-interest bearing account waiting for a batch cycle can now rotate intraday, into a tokenized Treasury, a tokenized money market fund, a short-duration yield instrument, and return to the payment rail before the next obligation clears.

This isn’t theoretical. BlackRock’s BUIDL fund, a tokenized money market instrument, surpassed $2.5 billion in AUM within two years of launching, making it one of the fastest growing institutional products in recent memory. The broader tokenized US Treasury market grew from $3.9 billion at the start of 2025 to over $9 billion by November. That’s a 127% increase in under a year. WisdomTree’s tokenized money market fund grew from $112 million to $730 million over the same period, and in February 2026 received first of its kind SEC exemptive relief to trade 24/7 against USDC with instant blockchain settlement.

The infrastructure for intraday capital rotation isn’t coming. It’s here.

And the stablecoin market itself, now approaching $300 billion in market cap, with a record $33 trillion in transfer volume in 2025 alone, provides the settlement layer that makes this rotation frictionless.

How this actually works

To understand the threat, you need to understand the plumbing.

Banks already offer sweep accounts, typically end of day processes that move excess cash into money market funds and bring it back the next morning. Treasurers have used them for decades. But sweeps are bank managed, batch processed, and limited to a narrow set of bank affiliated instruments. The bank controls where the money goes, and it comes back automatically. The deposit relationship stays intact.

Tokenized money market funds change this in ways that matter.

Take BlackRock’s BUIDL fund, the largest tokenized money market instrument. An institutional investor can subscribe by wiring dollars to the fund. They receive BUIDL tokens representing shares in a portfolio of short term US Treasuries yielding 4-5%. When they need cash, they don’t wait for a T+1 redemption. They send their BUIDL tokens to a Circle smart contract that atomically, in the same transaction, returns the equivalent value in USDC. That happens 24/7, in seconds, on a blockchain. Circle acts as the liquidity bridge, fronting its own USDC reserves and redeeming the underlying Treasuries through traditional settlement channels afterwards.

This is the critical mechanism. The BIS flagged it explicitly in its November 2025 bulletin: instant stablecoin redemption facilities create “the potential for shocks to propagate between the TMMF and stablecoin markets,” but they also make tokenized funds functionally as liquid as cash from the investor’s perspective.

Now think about what this means for a corporate treasurer sitting on $50 million in a non-interest bearing operating account.

Today, most of that money sits idle between payment cycles. The treasurer tolerates this because the alternatives are slow as selling a traditional money market fund takes T+1, wiring money takes hours, and the effort of active treasury management isn’t worth it for intraday time horizons. The bank funds loans against that idle balance at zero cost.

Now give that treasurer access to BUIDL, or WisdomTree’s tokenized MMF, or any of the growing number of tokenized yield instruments with instant stablecoin redemption. The math changes. They keep $10 million in the bank for immediate obligations. The other $40 million goes into tokenized Treasuries earning 4-5%.

That $40 million is no longer a deposit. It’s gone from the bank’s balance sheet. Genuinely gone.

When the treasurer needs cash, say for a supplier payment, a payroll run, a margin call then they redeem BUIDL to USDC in seconds and either convert to fiat or use the stablecoin directly. The money might return to the original bank. Or it might go to a different bank. Or it might stay as USDC and never touch a bank account at all.

This isn’t a sweep account. In a sweep, the bank manages the process, chooses the instruments, and the money comes home every morning. In this model, the treasurer controls the flow. The bank is bypassed entirely during the yield-earning phase. And the instant redemption facility means there’s no liquidity penalty for keeping capital outside the banking system, you can get it back in the time it takes to confirm a blockchain transaction.

The BIS put it plainly:

What’s new is that tokenized MMFs now offer both, higher yield and instant liquidity. The convenience gap that kept money in bank accounts is closing.

This is why the exchange yield debate misses the structural point. Close the loophole, ban exchanges from paying interest on stablecoin balances but it doesn’t change this dynamic. The yield isn’t coming from the stablecoin. It’s coming from tokenized Treasuries that the treasurer can enter and exit in seconds, using stablecoins as the on-ramp and off-ramp. No exchange yield required. No stablecoin interest required. Just fast enough settlement that capital doesn’t need to be idle.

Treasury management shifts from a liquidity problem to a return optimisation problem.

Who’s already moving

A 2026 Ripple survey found that 72% of finance leaders now consider digital assets essential to competitiveness — not optional, not experimental, essential. More telling: 74% of those finance leaders described stablecoins as tools for cash flow management, not just payments. That’s the language of treasurers, not crypto enthusiasts.

The EY-Parthenon survey from mid-2025 found that 13% of financial institutions and corporates were already using stablecoins, with 54% of non-users expecting to adopt within 6 to 12 months. Even accounting for survey optimism, that’s a steep adoption curve.

And this isn’t just a large-cap phenomenon. Community banks and credit unions are being approached by infrastructure providers offering plug and play stablecoin capabilities through existing core banking platforms. The middleware layer is maturing fast.

The corporate treasurers who figure this out first will be the best, most sophisticated clients at every bank. They’re the ones managing the largest operating balances, exactly the deposits banks can least afford to see become transient.

The NIM compression we should be modeling

Most bank analysts model NIM risk as a function of the rate environment. If rates fall, funding costs drop but so do asset yields. If rates rise, there’s a lag effect. The models are sophisticated and well understood.

What they don’t model is a change in the behavior of deposits at a given rate level.

If 10-15% of non-interest bearing deposits, which is currently around 23% of total deposits at US banks, start behaving like intraday capital that rotates through yield instruments, the effective cost of that funding goes from zero to something. Not because the bank is paying interest on those deposits, but because the capital is no longer reliably idle. The bank can no longer count on it for stable funding.

That changes liquidity ratios. It changes the assumptions underpinning loan pricing. It changes the economics of maturity transformation.

And unlike the MMF shift of the 1980s, which played out over a decade, programmable settlement compresses the timeline. The infrastructure is already live. The regulatory framework is being finalized. The corporate treasurers are paying attention.

The price of keeping deposits

Here’s where I think the conversation needs to land, and it’s simpler and harder than any technology debate.

Banks exist to take deposits and make loans. That’s the engine of credit creation. It’s how small businesses get funded, how mortgages get written, how the economy grows. ICBA’s point about community banks making 60% of US small business loans under $1 million isn’t lobbying rhetoric, it’s a description of how the real economy works. Those loans are funded by deposits. Cheap, stable, idle deposits.

When a corporate treasurer can earn 4-5% in a tokenized Treasury and get back to cash in seconds, a non-interest bearing deposit account isn’t a convenience anymore. It’s a cost. The treasurer knows exactly what they’re giving up by leaving money in the bank, and they can now act on that knowledge in real time.

So what does the bank do? It pays.

Not because of a regulation. Not because of a rate cycle. Because the alternative is losing the deposit entirely. The treasurer doesn’t care whether the bank has its own blockchain or uses someone else’s. They don’t care about tokenized deposits versus stablecoins versus programmable rails. They care about yield. If the bank isn’t offering a competitive return, the money walks and now it can walk in seconds.

We already know what this looks like. During the 2022-2023 rate hiking cycle, when the Fed raised rates by 525 basis points, deposit betas rose faster than in any cycle since before the financial crisis, reaching 0.4 within one year, compared to three years in the prior 2015-2019 cycle. Banks had to raise rates aggressively to retain deposits, and even after the last rate hike, cumulative deposit betas kept rising through 2024 as competition intensified. Community banks saw their cost of funds jump by 66 to 94 basis points in a single quarter. By the end of 2023, 19% of community bank assets were funded by wholesale sources, the highest level since 2017, because retail deposit competition had become too expensive.

That was just the rate environment doing its work. Now add instant access tokenized yield instruments into the mix.

What this does to lending

In December 2025, the Federal Reserve published a research note that modeled exactly this scenario. The paper, “Banks in the Age of Stablecoins,” examined what happens to bank lending when deposits migrate to stablecoins and the money doesn’t recycle back into the banking system.

The key finding:

The range comes from the deposit to lending multiplier, the empirical relationship between deposit levels and loan provision, estimated at 0.6 to 1.26 across the academic literature.

The Fed modeled three adoption scenarios. In the low case, the lending contraction ranges from $65 to $141 billion. In the moderate case, $190 to $408 billion. In the high case, which assumes stablecoin issuers gain access to Federal Reserve master accounts, the contraction reaches $600 billion to $1.26 trillion.

And here’s why the “recycling” question matters so much. When a deposit converts to a stablecoin, where do the reserves go? If they go back into bank deposits, the funding stays in the system and lending capacity is preserved. But look at Tether’s reserve composition as of mid-2025: 64% US Treasuries, 10% repos, 14% money market funds, and just 3.7% bank deposits. The vast majority of stablecoin reserves sit outside the banking system. The money doesn’t come back.

This is the mechanism that the yield loophole debate misses entirely. It doesn’t matter whether the stablecoin itself pays interest. What matters is that when a deposit leaves a bank to become a stablecoin, only a tiny fraction of that value returns as a bank deposit. The rest goes into Treasuries and money markets. The bank loses the funding. The lending capacity disappears.

The 1980s replay

When money market funds gave depositors a better alternative in the 1980s, banks didn’t lose all their deposits. They lost their pricing power. They had to raise deposit rates, offer MMDAs, and compete on yield for funding that used to be free. Some banks adapted and thrived. Over a thousand S&Ls didn’t survive the transition. The survivors consolidated, found new lending categories, and rebuilt margins over a decade. But the industry was permanently restructured around a higher cost of funding.

Programmable settlement is setting up the same dynamic, only faster. The instruments are better, tokenized Treasuries with instant stablecoin redemption versus traditional MMFs with T+1 settlement. The access is broader, any treasurer with a wallet, not just those with brokerage accounts. The timeline is compressed as the infrastructure is already live. And the recycling problem is worse, MMF assets at least circulated partially through the banking system, while stablecoin reserves flow predominantly into Treasuries and repos.

Close every yield loophole. Shut down exchange rewards programs. It won’t change the underlying math. When capital can move instantly into yield bearing instruments and back, banks will have to pay to keep it. The deposits might stay. But they won’t be cheap. And the loans they fund won’t be either.

That’s the end of idle money. And the Fed’s own research tells us what it costs: for every hundred billion that doesn’t come back, sixty to a hundred and twenty six billion in lending disappears with it.

References

Legislation and regulatory sources

• GENIUS Act — Full text, S.1582, 119th Congress

• The Stablecoin Yield Debate — Congressional Research Service

• OCC Proposed Rules to Implement GENIUS Act — Sullivan & Cromwell

• Stablecoins and the GENIUS Act: An Overview — Federal Reserve Bank of Richmond

Banking lobby and deposit protection

• ABA and 52 State Bankers Associations Urge Congress to Close Stablecoin Interest Loophole

• ICBA Urges Congress to Preserve Access to Credit by Extending Prohibition on Yield-Bearing Stablecoins

• ABA Banking Journal: Uphold Genius Act Prohibition on Stablecoin Interest Payments

Deposit trends, bank performance, and lending impact

• FDIC Quarterly Banking Profile — Q4 2025

• Bank Deposits Migrate into Interest-Bearing Accounts — BauerFinancial

• Bank Deposit Rates Haven’t Kept Pace — Federal Reserve Bank of Kansas City

• Bank Deposit Growth to Remain Sluggish Through 2025 — OCC

• Banks in the Age of Stablecoins — Federal Reserve FEDS Notes, December 2025 (Jessie Jiaxu Wang et al.)

• Higher Deposit Costs Continue to Challenge Banks — Federal Reserve Bank of St. Louis, September 2024

• Deposit Betas: Up, Up, and Away? — Federal Reserve Bank of New York, Liberty Street Economics, April 2023

Money market fund history and Regulation Q

• Interest Rate Controls (Regulation Q) — Federal Reserve History

• Money Market Mutual Funds — Federal Reserve History

• Depository Institutions Deregulation and Monetary Control Act of 1980 — Federal Reserve History

• Disintermediation Marches On — Federal Reserve Bank of Chicago

Tokenized money market funds — mechanics and risks

• The Rise of Tokenised Money Market Funds — BIS Bulletin No. 115

• The Financial Stability Implications of Tokenized Investment Funds — Federal Reserve Bank of New York

• Circle Announces USDC Smart Contract for Transfers by BlackRock’s BUIDL Fund Investors — BusinessWire

• Tokenised Money Market Funds: The Digital Revolution of Cash Management — AIMA

• Tokenized Money Market Funds 101: Liquidity Meets Yield — Circle

Tokenized assets and stablecoin market data

• Stablecoin Transactions Rose to Record $33 Trillion in 2025 — Bloomberg

• BlackRock’s $2.5 Billion Tokenized Money Market Fund — Fortune

• The Emergence of Tokenized Investment Funds — Federal Reserve Bank of New York

• RWA.xyz — Tokenized U.S. Treasuries Dashboard

• SEC Grants WisdomTree Exemptive Relief for 24/7 Trading — The Block

• WisdomTree 24/7 Trading and Instant Settlement — BusinessWire

Institutional adoption surveys

• EY-Parthenon Stablecoin Survey — Cost Savings and Speed Drive Adoption

• Ripple Survey: 72% of Finance Leaders Say Digital Assets Now Essential — CryptoTimes