|
A Mad Rush?
The rush is on to create tokenized deposit networks to compete with stablecoins. This week, a group called the BankChain Alliance announced it had signed 39 state banking associations to create an industry-owned, interoperable network on a common blockchain platform. The group, which had not yet selected a technology vendor, plans to launch in 2027. The news follows previous announcements by other players, such as The Clearing House Payments Co., regional banks (the Cari Network) and the Independent Bankers Association of Texas (DTX Consortium), among others. Almost all of them hope to sign on lots of banks, according to Bank Director’s Banking and Fintech Editor Greg Neumann.
Tokenized deposits are digital representations of deposits that sit on a bank’s balance sheet and are therefore insured by the Federal Deposit Insurance Corp. Since they use a blockchain, they can theoretically settle faster than the complex, global payments systems now in use.
They also could be the industry’s answer to U.S. regulated stablecoins, which were ushered in by the Genius Act last summer. Banks worry that stablecoins eventually could move faster and cheaper than today’s bank transfers and wires. Plus, if customers store significant sums in stablecoin wallets, that could drain the industry of deposits and by extension, funding for loans.
Tokenized deposit networks, however, are not new. As McKinsey & Co. pointed out in a report this year, global systemically important banks have been moving substantial tokenized deposits on internal blockchains, to the tune of about $4 trillion annually. That’s far greater than stablecoin circulation values of about $300 billion, according to the consulting firm.
The trouble with those internal blockchains is that unlike public, permissionless blockchains such as Ethereum, the large bank blockchains don’t connect with other banks, limiting their usefulness for customers making payments. There is a mad rush to solve this problem, with networks that banks can join to retain deposits while satisfying customer demands for faster, cheaper payments. If those networks can solve the interoperability problem, they’ll have more chance of success.
• Naomi Snyder, editor-in-chief for Bank Director
| 
