The battle for programmable money is moving from crypto markets into the core of regulated banking.
The Contest Is No Longer Theoretical
For years, the debate over digital money was dominated by central bank digital currencies and privately issued stablecoins. A third form is now moving quickly from pilot to production: the tokenised bank deposit. It is still a commercial bank liability, but represented and transferred on programmable digital infrastructure rather than only through conventional account ledgers.
That distinction matters. Stablecoins have already built global circulation on public blockchains and demonstrated demand for always-on, programmable settlement. Tokenised deposits aim to reproduce many of those functional benefits without asking users to leave the regulated banking system. The Bank for International Settlements has increasingly framed the future monetary system around tokenised central bank reserves and commercial bank money, while warning that widespread stablecoin adoption could alter bank funding, credit provision and monetary sovereignty. [1]
The IMF makes the underlying choice clearer: tokenised deposits are digital extensions of bank liabilities and inherit the institutional architecture around bank money, while stablecoins are privately issued reserve-backed tokens whose par value depends on reserve quality, liquidity and operational capacity. The technology may look similar at the interface; the risk allocation is different underneath. [2]
What Exactly Is a Tokenised Deposit?
A tokenised deposit represents a claim on a commercial bank. In economic substance, it is not intended to create a new currency. It changes how a deposit is recorded, transferred and programmed. The customer still has a bank claim; the token becomes a digital representation of that claim on a distributed ledger or comparable programmable platform.
That gives tokenised deposits a powerful proposition for institutions: combine 24/7 transferability, conditional payments and atomic settlement with the balance-sheet relationship, compliance controls and liquidity structure of a regulated bank. The BIS argues that deposits can carry the strengths of the existing monetary system into programmable environments rather than forcing the financial system to rebuild trust around a new private instrument. [10]
J.P. Morgan has moved this model onto a public blockchain. Its JPM Coin USD deposit token, available to institutional clients on Base, allows eligible clients to send and receive tokenised commercial bank money with near-instant settlement. The bank explicitly positions the instrument as a deposit token rather than a stablecoin, and as a bridge between traditional banking and on-chain finance. [4]
Why Stablecoins Got There First
Stablecoins began with a structural advantage: they were native to open blockchain networks. They did not need the banking industry to agree on a common token standard, shared ledger or interbank settlement model before achieving circulation. Issuers could distribute a bearer-like digital token and let exchanges, wallets, payment firms and developers build around it.
That gave stablecoins network effects that tokenised deposits are only beginning to confront. A widely used stablecoin can move between exchanges, wallets, merchants and protocols without every participant maintaining a deposit relationship with the same issuing bank. This portability is especially valuable in crypto markets and in cross-border settings where access to a major currency is more important than integration with a domestic banking relationship.
The BIS nevertheless highlights a fundamental weakness: stablecoins can be transferable across open networks without being embedded in the same institutional mechanisms that keep commercial bank money at par. Redemption design, reserve liquidity, fragmentation across chains and financial-crime controls therefore become part of the monetary architecture rather than merely operational details. [1]
The Banks’ Strongest Argument: Money Already Has an Institutional Home
The strongest case for tokenised deposits is not technological. It is institutional. Commercial bank money already sits inside a two-tier monetary system in which banks settle obligations using central bank money. Regulation, supervision, liquidity facilities, resolution regimes and — for eligible retail deposits — deposit insurance support confidence in that system.
The IMF notes that tokenised deposits inherit much of this architecture from their non-tokenised equivalents. Stablecoins generally do not have direct access to central bank settlement, deposit insurance or bank resolution frameworks. That does not make every bank deposit risk-free, but it means the mechanisms supporting par exchange are established rather than being recreated through reserve management and redemption promises. [2]
For large corporates and financial institutions, this distinction can be decisive. A treasury team moving hundreds of millions of dollars may prefer programmable money that remains a familiar bank exposure, sits inside existing cash-management arrangements and can be integrated with credit, FX, liquidity and transaction-banking services.
Project Agorá Changes the Debate
The most important evidence for tokenised deposits may come from cross-border payments rather than domestic retail payments. In May 2026, Project Agorá reported that its prototype had demonstrated atomic multi-currency settlement using tokenised commercial bank deposits alongside tokenised central bank reserves. The project involves central banks and more than 40 regulated financial institutions and is moving toward real-value testing. [3]
This matters because it attacks one of stablecoins’ strongest use cases: moving value across jurisdictions outside conventional banking hours. If regulated banks can achieve always-on, programmable and atomic cross-border settlement while preserving finality in central bank money, tokenised deposits become much more than a defensive response to crypto. They become a potential redesign of correspondent banking itself. [3]
Citi Shows the Model Moving Into Production
The institutional race is already becoming operational. In July 2026, Siam Commercial Bank became the first financial-institution client to go live with Citi’s integrated 24/7 USD Clearing and Citi Token Services offering, enabling near-real-time, round-the-clock cross-border dollar payments. Citi describes the service as using blockchain and tokenised deposits to overcome settlement delays and traditional cut-off times. [5]
This is the practical bank response to stablecoins: do not argue that always-on money is unnecessary; make deposits always-on. If banks can remove cut-off times, reduce reconciliation and make liquidity programmable, they narrow the functional gap that stablecoins exploited.
But Tokenised Deposits Have a Distribution Problem
Tokenised deposits are strong inside a bank relationship. Their weakness appears when money needs to move beyond it. A token issued by Bank A is still a liability of Bank A. If Bank B, a wallet provider, a merchant or a decentralised application cannot accept or redeem it seamlessly, the system risks reproducing today’s fragmented correspondent and account structures in tokenised form.
Interoperability is therefore the central competitive issue. The winner will not simply be the instrument with the safest balance sheet. It will be the instrument that combines trust with acceptance. Stablecoins already benefit from broad on-chain composability. Tokenised deposits need common standards, interbank settlement mechanisms and legal clarity so that a token can move beyond a closed institutional network without losing its character as bank money.
The European Central Bank’s 2026 payments strategy reflects that reality. It sees tokenised deposits and properly designed stablecoins as potential private settlement assets, but keeps central bank money at the core of wholesale settlement. The policy direction is toward an interoperable ecosystem rather than a collection of isolated bank tokens. [6]
Stablecoins Still Win on Openness
Stablecoins retain a compelling advantage where the primary value proposition is open access. They can circulate on public blockchains across borders, time zones and applications. A developer can integrate a widely used stablecoin without becoming a client of the issuing reserve manager in the same way that an institutional user must typically be onboarded by a bank to use a deposit token.
That openness is one reason stablecoins became the default settlement asset of tokenised finance. The ECB has acknowledged that dollar-denominated stablecoins have first-mover and network advantages, even while arguing that tokenised commercial bank deposits may prove preferable for many wholesale uses once public settlement infrastructure and interoperability mature. [9]
Stablecoins may also be more attractive in markets where access to the banking system is limited, where users seek dollar exposure, or where transactions need to move across an ecosystem of exchanges and wallets rather than between established corporate bank accounts. These are not marginal use cases; they are precisely the areas in which stablecoins built their early scale.
Yield Could Change the Competitive Balance
Money competes not only on speed and safety, but also on return. Traditional deposits can pay interest. Deposit tokens can potentially preserve that feature because they remain bank liabilities. Stablecoin holders historically did not always receive the income generated by reserve assets, although exchanges and intermediaries are increasingly offering remuneration models.
The BIS has warned that remunerated stablecoins could become closer substitutes for bank deposits or money-market instruments. If stablecoin holders receive policy-rate-like yields while retaining 24/7 transferability, the competitive pressure on deposit funding becomes much more direct. Conversely, if banks can pay interest on tokenised deposits and make those deposits equally programmable, they regain an economic advantage that does not depend on user inertia. [12]
The Funding Question Is Bigger Than Payments
The argument is often framed as a payments contest, but the balance-sheet consequences could be more important. Bank deposits are a core source of funding for credit creation. If households and businesses shift meaningful balances into stablecoins, reserve flows may migrate toward government securities, money-market instruments or banking-sector deposits held by stablecoin issuers rather than remaining distributed across banks in the same form.
The BIS has highlighted this channel directly: widespread stablecoin adoption could change bank funding and credit provision, with effects depending on how stablecoin reserves are invested and how banks respond. That means the policy question is not simply whether a stablecoin is fully backed. It is where the backing ultimately sits and what happens to the intermediation capacity of the banking system. [1]
Regulators Are Signalling Coexistence, Not Prohibition
The emerging regulatory direction in major financial centres is not to choose one instrument and eliminate the other. The Bank of England has described a future multi-money system in which traditional deposits, tokenised bank deposits and regulated stablecoins can coexist, provided they remain robust and readily exchangeable. It has also encouraged banks to innovate in tokenised deposits while developing a separate regime for systemic stablecoins. [7]
The UK Prudential Regulation Authority has reinforced the distinction between bank deposits and stablecoins. Its May 2026 guidance clarifies expectations for deposit-takers exploring tokenised deposits and for banking groups considering stablecoin structures. That separation matters because a bank-issued token can carry very different protections depending on whether it is legally a deposit or a separate stablecoin liability. [8]
Who Wins in Wholesale Finance?
In wholesale banking, tokenised deposits have the clearer structural advantage. Corporates and financial institutions already rely on banks for liquidity, credit, foreign exchange, compliance and cash management. Adding programmability to that relationship is less disruptive than replacing bank money with a new private instrument and rebuilding the surrounding infrastructure.
The technology is also moving beyond pilots. J.P. Morgan’s public-chain deposit token, Citi’s 24/7 tokenised deposit infrastructure and Project Agorá’s cross-border prototype all point in the same direction: regulated commercial bank money can increasingly operate with features once associated mainly with stablecoins. [3] [4] [5]
If interoperability improves, tokenised deposits are likely to become the preferred settlement instrument for many high-value institutional flows, securities transactions, collateral movements and treasury applications. In those environments, the value of a regulated bank claim and central-bank-linked settlement can outweigh the benefits of unrestricted bearer-style circulation.
Who Wins in Open Digital Markets?
Stablecoins are harder to displace in open digital markets. Their ability to circulate across public networks, exchanges, wallets and applications gives them a distribution advantage that a collection of bank-specific tokens cannot automatically reproduce. They are already deeply embedded in crypto market structure and increasingly relevant to cross-border payments and digital commerce.
Banks can copy programmability. They cannot instantly copy network effects. For tokenised deposits to compete outside institutional finance, banks must solve interoperability at industry scale. A tokenised deposit that can move only between customers of one bank is technologically interesting but economically narrow.
The Real Winner May Be the Interoperability Layer
The strongest conclusion is therefore that the market may not crown one form of digital money. It may reward the infrastructure that allows several forms to coexist. The future system could include tokenised central bank money for final settlement, tokenised deposits for regulated private money, stablecoins for open-network liquidity and tokenised funds for cash management — connected through common standards and conversion mechanisms.
That is increasingly consistent with the direction taken by the BIS, IMF, ECB and Bank of England. The question is shifting from which token should replace money to how different digital claims can remain interoperable, redeemable and trusted while gaining the speed and programmability of new infrastructure. [1] [2] [6] [7]
Conclusion: Different Money for Different Jobs
If the contest is defined as high-value, regulated institutional settlement, tokenised deposits are emerging as the stronger candidate. They can combine programmable infrastructure with banking relationships, regulatory oversight and settlement anchored in central bank money. The rapid development of JPM Coin, Citi Token Services and Project Agorá shows that this is no longer a theoretical proposition. [3] [4] [5]
If the contest is defined as open, globally portable digital liquidity, stablecoins remain ahead. Their distribution, public-chain compatibility and established network effects are difficult to replicate quickly. They also serve users and markets that do not fit neatly inside traditional banking relationships.
So who wins? Probably neither in absolute terms. Stablecoins forced the financial system to recognise that money should move 24/7, across programmable networks, with fewer reconciliation layers. Tokenised deposits are the banking system’s attempt to absorb that lesson without surrendering the deposit relationship. The long-term winner will be the form of money — or the interoperability layer connecting several forms — that delivers programmability without sacrificing trust, liquidity and universal acceptance.
References
2. IMF — Tokenized Finance and Money, remarks by Tobias Adrian (22 May 2026)
3. BIS — Project Agorá shows how tokenisation can improve wholesale cross-border payments (27 May 2026)
4. J.P. Morgan — JPM Coin USD Deposit Token Available for Institutional Clients (12 November 2025)
5. Citi — Siam Commercial Bank and Citi launch 24/7 USD clearing with Citi Token Services (9 July 2026)
6. ECB — Eurosystem sets out comprehensive strategy for future of European payments (31 March 2026)
7. Bank of England — Modernising money and markets, speech by Sarah Breeden (May 2026)
9. ECB — Stablecoins and the future of money: separating functions from instruments (8 May 2026)
10. BIS — How deposits can harness tokenisation (12 November 2025)
11. IMF — Tokenized Finance, IMF Note 2026/001 (2 April 2026)
12. BIS — Stablecoin remuneration on centralised exchanges (19 June 2026)