U.S. banks partner with Quant to build an interoperable tokenized deposit settlement network.

Author: Prathik Desai (The Token Dispatch)

Compiled by Deep潮 TechFlow

DeepChain Summary: Tokenized deposits are becoming a key driver for global mainstream banks to embrace blockchain, with platforms like JPMorgan’s Kinexys achieving daily trading volumes in the tens of billions of dollars. However, due to each commercial bank operating its own separate consortium blockchain ledger, tokenized deposits remain confined within individual bank account systems, turning into isolated liquidity silos.

This dilemma bears striking resemblance to the historical emergence of centralized clearinghouses in mid-19th century New York, which arose due to the heavy burden of check clearing among banks. Today, The Clearing House, which operates CHIPS and RTP, in collaboration with technology provider Quant, has launched an on-chain money network aimed at establishing a unified, real-time interbank settlement hub for commercial banks across the United States.

Building an interoperable clearing layer for tokenized deposits is not only about seamlessly aligning the banking system with central bank reserve currencies, but also about establishing the core competitive advantage for traditional financial institutions to counter private stablecoins and reshape a 24/7 real-time payment ecosystem.

Hello,

The core utility of a currency depends on its liquidity.

Imagine transferring money to a friend who has an account at another bank: behind the scenes of your mobile banking app, the two banks settle and clear the transaction, while the funds maintain exactly equal value across both banks.

Over the past few years, commercial banks have been reimagining deposit formats in response to an ever-digitizing world, giving rise to tokenized deposits.

Major institutions such as JPMorgan Chase, Citibank, and HSBC have already launched tokenized deposit services.

These tokenized deposits can be transferred in real time, 24/7, and are programmable. However, they currently operate only within specific closed banking ecosystems.

Tokenized deposits are essentially claims against the issuing bank and cannot be directly used on other banks' distributed ledgers.

Although tokenized deposits are programmable, the greatest challenge lies in connecting them across different banking ecosystems.

In this article, I will deeply analyze why an interoperability layer that breaks down banking barriers and enables tokenized deposits to flow freely across different banks is the true core that unlocks the greatest value.

Next, let's move on to the main content.

On September 24, seven UK commercial banks completed two refinancing mortgage transactions in an unprecedented manner.

The borrower's funds remain locked in their personal account and continue to accrue interest; the funds are released instantly at the moment the transaction is finalized, with no party needing to wait for time-consuming fund settlement.

Seven banks, including Barclays, HSBC, Lloyds, and NatWest, operate collaboratively through the same shared platform.

The UK Finance association commissioned the London-based software company Quant to build this network. Without this shared infrastructure, tokenized deposits issued by each bank would remain isolated silos.

The Bank for International Settlements (BIS) also clearly highlighted this in its September report.

Without interoperability, tokenized deposits cannot cross the "KYC boundaries" of commercial banks.

This means that tokens issued by my bank are meaningless on another bank’s ledger, as the latter has neither conducted due diligence on the former nor agreed to honor its debt instruments.

This is the biggest bottleneck facing the current realization of asset tokenization vision.

Tokenized bonds or funds are only truly settled when there is instantaneous, second-by-second exchange between the asset side and the cash side.

On the largest tokenized repurchase agreement platform today, while securities assets are already on-chain, cash settlement still relies on traditional banking clearing channels.

The global tokenized U.S. Treasury fund size has grown to approximately $14.5 billion, yet the vast majority of these funds still rely on outdated traditional settlement methods.

But this is by no means an insurmountable dead end; financial history has already provided solutions to similar challenges.

In the early 1850s, New York's commercial banks sent couriers (Porters) across the city daily to exchange checks for interbank settlement.

As more banks opened, this peer-to-peer human clearing network completely collapsed.

In 1853, banks joined together to establish a unified clearinghouse that performed a single daily net settlement of all outstanding checks.

This institution is today’s The Clearing House. It is jointly owned by approximately 25 of the largest commercial banks in the United States and operates two of the nation’s core payment clearing systems: CHIPS and RTP.

Today, banks face a new challenge: tokenized deposits scattered across commercial bank ledgers must be able to align in real time with central bank fiat reserves, even on weekends.

To address this pain point, major banks are reaching consensus on establishing a shared universal layer to centrally settle cross-bank transactions involving tokenized deposits issued by different banks.

On September 24, the U.S. clearing house selected Quant through a bidding process to operate the orchestration layer for its On-Chain Money network.

The network is expected to officially open to commercial banks across the United States in the first half of 2027.

The clearing layer in financial infrastructure has nearly natural monopolistic characteristics.

Once a country’s banking system collectively establishes a unified set of rules and a settlement venue, this structure often remains unchanged for decades.

When The Clearing House launched its Real-Time Payments (RTP) network in 2017, it was hailed as the first new core payment system in the United States in over 40 years.

The fundamental logic of this industry is exactly this: once the entry window for key technology stacks and clearing seats opens and core seats are secured, that door will close to an entire generation.

In 2016, after a bidding process, the U.S. Clearing House hired Vocalink, a company owned by UK banks, to build the RTP network. Vocalink had previously successfully developed the UK’s Faster Payments system.

Today, the RTP network processes approximately $7 billion in transactions daily. A decade later, the Clearing House reopened the bidding process and once again selected another technology provider from London.

Unlike in the past, multiple foundational positions capable of accumulating massive value are currently being established simultaneously.

The wave of tokenized money has forced every major banking system worldwide to confront and answer the same challenge within just 18 months.

Quant secured the two largest domestic tokenized money infrastructure contracts in the history of the UK and US on the same day.

Meanwhile, SWIFT has chosen to build its own shared ledger. Currently, 17 banks are participating in the pilot, and SWIFT expects to expand to at least 19 banks covering five fiat currencies by the end of 2026.

Tech giants such as Chainlink, IBM, ACI, and Oracle are competing to provide pathways for commercial banks to connect to this network.

U.S. regional banks have jointly launched the Cari network built on ZKsync.

The European Central Bank (ECB) did not hire any private orchestration service providers; its self-built Pontes link went live on September 21, enabling direct final settlement of tokenized assets using central bank reserve currencies.

So, what is the true core value of this clearing hub position? The answer is liquidity efficiency.

CHIPS, the clearing system operated by The Clearing House for large-value payments, processed an average daily volume exceeding $2 trillion in 2025.

Thanks to its multilateral real-time netting and hedging mechanism, commercial banks need to allocate only about $96 billion in liquidity positions to complete settlement, compared to the $442 billion required without this mechanism.

The U.S. clearinghouse estimates that this system saves member banks up to $5.5 billion in funding costs annually. This is the core power of an excellent clearing layer: enabling the entire financial system to operate smoothly with only a fraction of the capital otherwise required.

In contrast, the current state of tokenized deposits: JPMorgan's Onyx, the largest bank-backed token network, has an average daily trading volume of approximately $7 billion.

This scale amounts to only about 0.3% of CHIPS’ daily transaction volume and is limited to JPMorgan’s own internal clients. Industry leaders remain trapped in walled gardens.

This enormous gap represents a historic strategic opportunity. No single bank, no matter how large, can fill this void alone—only a collectively built shared clearing layer can fundamentally break through this challenge.

This new clearing layer will generate enormous economic value.

The business logic of shared banking infrastructure has always been this way: the $5.5 billion in cost savings annually generated by CHIPS flows directly back to its member banks. The U.S. Clearing House is owned by the banks that use it, and its pricing mechanism similarly serves this system.

Vocalink is a classic example of a scenario where the technical builder earns development fees, while the asset owner collects rent.

It built the foundational networks for the UK’s Faster Payments and the US’s RTP, both of which process trillions of dollars annually. In 2016, Mastercard acquired 92.4% of Vocalink’s equity for approximately £700 million, at a time when Vocalink generated annual revenue of £182 million.

This substantial premium went entirely to the UK banks that held equity in Vocalink. While it represented a significant exit return for the technology provider, the technology side did not share in the long-term gains of the vast financial system it helped build.

Today, Quant is deeply integrated within the shared tokenized money infrastructure of the world’s two leading financial centers.

If progress goes smoothly, it will grow into a technology company with significant valuation potential. However, the banking consortium that orchestrates and governs these networks will capture far more value than the technology providers themselves.

Therefore, the true ultimate winners are the ecosystem organizers and rule-makers, such as the U.S. Clearing House, the British Financial Industry Association, and SWIFT.

Only institutions that control access rules, pricing power, and the authority to set clearing standards can capture the majority of core value within the ecosystem.

Following closely behind are commercial banks that connected to the network early, including a large number of small and medium-sized banks.

Across the U.S., there are 4,238 banks insured by the Federal Deposit Insurance Corporation (FDIC), 90% of which are community banks incapable of independently operating blockchain nodes.

Quant’s solution for tokenized deposits, issued on behalf of midsize banks through the U.S. clearinghouse, is the strongest argument for a utility-grade shared network countering JPMorgan’s dominance. Without this foundation, tokenized finance would become an exclusive privilege of Wall Street giants.

The potential structural risk lies in the fact that while commercial banks eliminate fragmentation within their own clubs, they may replicate new liquidity barriers between different clubs.

In the United States alone, there are currently the U.S. Clearing House Network, the Cari Network, the Kinexys system, and a consortium stablecoin project involving 21 banks scheduled to launch in 2027.

Huntington Bank and KeyBank simultaneously entering Cari and the U.S. Clearing House serve as a vivid example of the fragmented yet coexisting ecosystem of tokenized deposits.

When commercial banks jointly control this "cross-chain translator," it becomes a public utility—and public utilities typically cannot charge excessive tolls. The true hub of value accumulation lies in underlying interoperability, which is the battleground for all key players.

Interoperability may sound like a dry technical term, but its real significance goes far beyond that.

It is essentially the dividing line between “commercial gift cards” and “universal legal tender”: the former can only be spent at the issuing merchant, while the latter is universally accepted because everyone honors it at face value without conditions.

It took the modern banking system over a century to establish the fundamental principle that one dollar from Bank A is exactly equivalent to one dollar from Bank B. Central bankers refer to this as the "singleness of money."

Currently fragmented tokenized deposits challenge this understanding, and cross-bank interoperable clearing mechanisms are the key piece needed to reassemble them.

From a purely technical standpoint, establishing connectivity is not difficult; different ledgers have long been able to communicate and interact with each other.

The real underlying challenge lies in establishing an admission framework: which tokenized assets issued by other banks is a bank willing to accept? Under what risk management guidelines should they be enforced? And where will the final clearing and settlement ultimately take place?

In the UK, the solution involves settlement via central bank reserves; the European Central Bank has opted to build its own direct connection; in the United States, clearinghouses are developing regulatory guidelines, while Quant is responsible for building the underlying interbank orchestration platform.

If the global banking system can successfully resolve this challenge, the financial world will experience several profound transformations.

First, money is no longer a slave to time.

In traditional systems, transfers initiated on Friday evening often remain stuck in clearing channels until Monday, as the underlying settlement systems are shut down for the weekend. Corporate finance managers are forced to maintain large cash buffers to cope with this settlement vacuum.

Once bank funds achieve 24/7 real-time interbank settlement, this dormant liquidity will be fully reactivated.

Second, tokenized assets have finally gained a true cash settlement foundation.

A $14.5 billion tokenized U.S. Treasury fund, along with the underlying repurchase and bond markets, will be able to achieve same-day delivery versus payment (DvP) with fiat funds on the same blockchain network.

The counterparty risk in traditional trading—where one party has delivered the asset but the other has not yet received payment—will be completely eliminated. This is precisely the core value of tokenization that large financial institutions care about most, and the long-missing piece of the fiat puzzle.

Third, asset size will no longer serve as an insurmountable moat.

JPMorgan Chase can build its own token network solely due to its massive base of proprietary clients, a feat impossible for small and medium-sized community banks.

Shared infrastructure enables small and medium-sized institutions, which account for 90% of U.S. banks, to access tokenized financial services on par with top Wall Street firms simultaneously.

A more profound impact lies in the restructuring of the competitive landscape.

Over its first decade, the core appeal of decentralized stablecoins was that the dollar should be freely transferable between any parties, around the clock.

Tokenized commercial bank deposits with interoperability fully retain the 24/7 transfer capability, while also preserving FDIC insurance, demand deposit interest earnings, and compliant credit expansion capabilities, delivering a powerful competitive advantage over private stablecoins.

Within ten years, the financial industry will no longer deliberately mention the concept of "tokenized deposits."

It will merge completely with regular bank deposits, just as no one today feels the need to specifically emphasize "electronic payments."

End users never need to directly perceive the underlying clearing and settlement layer. It is precisely this subtle, invisible infrastructure quality that grants it unparalleled commercial value.

That’s all for today—see you in the next episode.

Stay curious, Prathik.