Major U.S. banks are preparing to move deposits onto the blockchain. JPMorgan Chase, Bank of America, Citibank, and other institutions have announced plans to launch a shared tokenized deposit network through The Clearing House by the first half of 2027, enabling bank deposits to benefit from 24/7 settlement and on-chain transfers.
This move directly targets the rapidly growing stablecoin market. Currently, USDC and USDT are widely used for cryptocurrency trading, cross-border payments, and certain store-of-value applications. Banks fear that if stablecoins further penetrate the mainstream payment system, customer funds may shift from traditional accounts to crypto wallets, thereby eroding core deposits.
The goal is to keep funds within the banking system.
The core idea of tokenized deposits is to map customers' bank deposits into digital tokens that can circulate on blockchain infrastructure. Unlike stablecoins, these funds remain within the banking system, with account relationships, compliance processes, and clearing controls still managed by banks.
Reid Noch, Vice President of U.S. Equity Market Structure at TD Securities, said that stablecoins, tokenized deposits, and tokenized money market funds are competing for dominance as "on-chain cash instruments." Banks advancing related networks at this time indicate they view stablecoins as real competitors.
Jefferies estimates deposit outflows of 3% to 5%.
In a March report, Jefferies estimated that stablecoins could cause banks to lose 3% to 5% of their core deposits over the next five years and reduce average bank profitability by approximately 3%. This is also a key backdrop for banks accelerating their deployment of on-chain payments.
Supporters argue that tokenized deposits primarily target payment efficiency. Traditional wire transfers, especially cross-border payments, are often costly and typically take one to two business days to complete. By leveraging blockchain infrastructure, fund transfers between banks could approach real-time settlement and operate around the clock.
The Clearing House leads the initiative
As planned, this network will be led by The Clearing House and shared among multiple major banks. If the project progresses smoothly, corporate payments and treasury management are likely to be the first use cases implemented, as these customers place greater emphasis on compliance frameworks, fund security, and control within the banking system.
Although both use blockchain infrastructure, banking solutions differ from the open networks championed by the crypto industry. Commentator Noelle Acheson notes that banks have been testing private or closed systems for years, focusing on improving the efficiency of internal or inter-institutional transfers while maintaining strict control over users and transactions.
This means that even if major banks actively join the blockchain, the new tokenized deposit network will still differ significantly from the stablecoin ecosystem on public blockchains. Stablecoins offer advantages such as greater liquidity, broader usage, and the ability to circulate freely on open networks, while bank tokenized deposits are more likely to attract corporate clients seeking to remain within existing compliance frameworks.
If The Clearing House's network launches as planned, the competitive landscape for on-chain dollars could shift significantly. Over the coming period, stablecoins, tokenized deposits, and tokenized money market funds may compete more directly in areas such as payments, clearing, and corporate treasury management.