U.S. banks launch collaborative tokenized deposit network to counter stablecoin growth

Article by Anna Irrera, Bloomberg

Compiled by Saoirse, Foresight News

For years, major banks have largely stood by as stablecoins evolved. What began as a niche category of cryptocurrencies has grown into a payment network handling trillions of dollars annually. Now, banks aim to replicate the collaborative model that created Zelle, hoping to build shared infrastructure to halt the ongoing erosion of their business by various digital dollar initiatives.

Major banks including JPMorgan Chase, Bank of America, HSBC Holdings, Citigroup, and Wells Fargo have recently jointly announced a plan to build an interconnected network of tokenized bank deposits. Tokenized bank deposits are the digital form of funds held within the commercial banking system, enabling transfers via blockchain payment channels—a technology originally introduced by the cryptocurrency industry.

Zelle logo on a smartphone. Photographer: Tiffany Hagler-Geard / Bloomberg

This initiative is operated by The Clearing House (TCH), the U.S. Payments Clearing House, commonly known as the New York Clearing House, marking the first large-scale collaborative effort by the U.S. banking industry to address stablecoins. Stablecoins, typically pegged to the U.S. dollar, enable round-the-clock payment and settlement processing, with their use cases continuing to expand.

Banks are increasingly recognizing that the competitive threat posed by stablecoins is no longer theoretical. Initially used mostly for cryptocurrency trading, stablecoins are now being adopted by an increasing number of payment companies and financial institutions seeking lower-cost, faster payment channels. Data from analytics firm Artemis Analytics shows that stablecoin transaction volume surged 72% last year, reaching approximately $33 trillion; Bloomberg Intelligence forecasts that stablecoin payment flows could exceed $50 trillion by 2030.

The clear model for this latest banking initiative is Zelle. More than a decade ago, major banks collaborated to build a peer-to-peer payment network to compete against rapidly rising consumer payment apps like Venmo. After years of preparation, the project finally launched, and today Zelle processes over $1 trillion in payments annually, standing as one of the banking industry’s most successful defenses against external competitors.

However, it remains uncertain whether banks can replicate this success again. The market is evolving rapidly, and dozens of competing institutions must align on technical standards, governance rules, and business incentive mechanisms. Historically, numerous consortium projects in finance have stalled due to divergent interests that slow down decision-making and investment.

Alessandro Hatami, Managing Partner at fintech advisory firm Pacemakers.io and former Head of Digital Payments at Lloyd’s Bank, said: “It was these very banks that, over the past decade, publicly announced numerous blockchain projects. Competition among banks makes it inherently difficult to build shared infrastructure.”

During the Trump administration, regulatory trends became more relaxed, prompting Wall Street to aggressively advance tokenization initiatives. U.S. policymakers believe that various dollar-pegged tokens can reinforce the U.S. dollar’s global dominance while boosting demand for U.S. Treasury bonds.

Last year, the U.S. enacted the GENIUS Act, establishing a comprehensive regulatory framework for stablecoins, effectively sounding the horn for their mainstream adoption. The focus of policy discussions has since shifted to market-related regulations and whether stablecoin issuers should be permitted to offer interest earnings or reward benefits—should this restriction be lifted, bank deposits could face significant outflows.

Nicole Sandler, Chief Ecosystem Officer at tokenized clearing startup Ubyx, said: “Competitive threats are now clear and quantifiable. Banks are increasingly seeing customers opt for stablecoins to transfer funds—this is fundamentally different from the distant, abstract potential threats of the past.”

For years, major banks have been continuously experimenting with blockchain technology, both independently and through collaborative initiatives. Large institutions such as JPMorgan Chase, Citibank, and Bank of New York Mellon have already launched their own blockchain-based payment systems, enabling customers to transfer funds 24/7.

Although these proprietary platforms possess some characteristics of stablecoins and benefit from commercial banking advantages such as interest-bearing deposits and deposit insurance, their transfer capabilities are typically limited to transactions between internal customers. In contrast, stablecoins enable users to transfer funds to any entity worldwide, regardless of their issuing institution.

One of the core objectives of The Clearing House is to enable interoperability between different digital currency systems, thereby significantly expanding its market reach and transaction volume.

Debopama Sen, Head of Payments for Citi’s Services Business, noted: “Achieving system interoperability and building scalable platforms to simplify customer operations is crucial. Many of our large clients operate globally and work with multiple partner banks.”

A blockchain-based form of currency, source: Bloomberg

The Clearing House plans to connect with financial institutions that collectively manage trillions of dollars in deposits and serve tens of millions of customers; once completed, its scale and reach will far exceed that of the current stablecoin market.

Christopher Ward, Head of Corporate Payments at Truist Financial, said: “This is no different from the logic behind the U.S. push to build a real-time payment system back then—各方联合制定统一规则，实现广泛普及。When the current project follows the same approach.”

The Clearing House has deep expertise in industry network operations and excels at balancing the interests of community banks, regional banks, multinational institutions, and foreign entities operating in the U.S., making it well-suited to serve as a coordinator. The project is scheduled for official launch next year.

Elena Casal, Chief Customer Officer of The Clearing House, said: “Building industry-shared infrastructure is in our DNA. We already have mature governance frameworks and regulatory compliance processes that can help accelerate project deployment.”

Elena Casal noted that market demand is primarily focused on wholesale payments, particularly in corporate treasury management and liquidity allocation. This network is also capable of providing digital cash for the clearing and settlement of tokenized securities, enabling the development of tokenized capital markets. The Clearing House is currently selecting technology service providers, and the network has been designed with scalability to support stablecoin clearing services as needed in the future.

Although The Clearing House has a solid foundation for success, the banking digital currency space is now highly crowded, with many similar projects already launched a decade ago. Multiple banks participating in several parallel initiatives simultaneously can lead to industry fragmentation, making it difficult to build cohesive momentum.

Last week, payment institution SWIFT revealed that more than 17 banks are preparing to pilot cross-border tokenized payments on their new distributed ledger. Additionally, institutions such as Goldman Sachs, Deutsche Bank, Bank of America, and Spain’s Santander formed a consortium at the end of last year to develop a stablecoin-style digital currency.

Manish Kohli, Head of Global Payment Solutions at HSBC, analyzed that platforms built on upgraded, established systems have a far higher chance of success than new projects built from scratch. Using The Clearing House’s current initiative as an example: “The project leverages existing infrastructure, has a stable member base, and clear domestic use cases in the U.S., significantly reducing implementation risks.” HSBC is also involved in multiple other initiatives, including SWIFT pilots, the UK’s Tokenized Deposits Initiative, and Hong Kong’s Ensemble project.

Banks possess significant advantages, including vast asset scales and regulatory qualifications, but their inherent weakness is slow decision-making. Take Zelle as an example—the project took years to develop, and it likely would not have grown substantially without pressure from competitors like Venmo; even after technical development was completed and the product was ready to launch, consortium members still argued over the product’s name.

In addition, the transition of established payment giants is not necessarily smooth. PayPal launched the stablecoin PYUSD in August 2023, but its adoption has been extremely low, with a circulating supply of only $2.9 billion—negligible compared to leading stablecoins: Tether’s USDT has a circulating supply of approximately $184 billion, while Circle’s USDC stands at $73 billion.

Leading stablecoins, source: CoinGecko

From this perspective, leading stablecoin issuers do not need to panic excessively. However, banks also do not need to rush to gain a first-mover advantage: many of the largest and most profitable corporate clients in the banking payments sector currently have no urgent need for programmable dollars.

Marieke Flament, Co-Founder of the digital currency advisory firm Currency of Power, said: “Banks may seem slow to act, but once they commit to a project, they can mobilize massive resources. However, the crypto space is evolving at an extremely rapid pace, and whether banks can keep up remains a significant challenge.”

Reporting assistance by journalists Paige Smith, Olga Kharif, and Yizhu Wang