Banks' interest in tokenized deposits grew in second quarter

• Key insight: Banks are testing and developing tokenized deposits at a slightly faster pace than stablecoins, according to an American Banker analysis. 
• What's at stake: With digital assets drawing investment, banks are pressured to develop strategies for both tokenized deposits and stablecoins. 
• Forward look: Banks are planning consortia to support both tokenized deposits and stablecoins. 

Banks are ramping up interest in tokenized deposits, an alternative to stablecoins that have potential appeal for risk-averse executives. 

Twenty-four of the largest 50 banks have tokenized deposits "on their radar" as of the first quarter, up from 19 the prior quarter, according to American Banker research on digital assets. That compares to the 17 banks that have stablecoins on their radar, up from 15 in the fourth quarter of 2025. 

"You've heard me talk a lot about Citi Token Services and a slew of other innovations. What they do is they let us modernize our own business where needed," Citi CEO Jane Fraser said during the bank's second quarter earnings call in July. "They grow new revenue streams for us and also allow us to acquire new clients."

Deposit tokens

A tokenized deposit, or deposit token, is a digital asset that is a claim on a deposit at a licensed depository institution, such as a bank. Deposit tokens are issued on a distributed ledger designed to make deposit tokens easier to transfer between consumers or businesses, particularly in different countries.

Tokenized deposits have deposit insurance, though they are more closely tied to specific banks, which may not be attractive to some businesses. While tokenized deposits are an alternative to stablecoins, they're not necessarily a replacement. Citi, for example, is also considering its stablecoin strategy. 

Citi is exploring stablecoin use cases including reserve management, converting stablecoins to traditional currency and a potential Citi stablecoin, Fraser said during Citi's most recent earnings call. "But probably most importantly is the tokenized deposit space where we're very active and then also providing custodial solutions for crypto assets. So this is a good opportunity for us."

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Tokenized deposit projects have also made more progress than stablecoins at other large banks. Four of the biggest U.S. banks have active tokenized deposits, while only one of the largest 50 banks has an active stablecoin, according to American Banker's analysis. Three banks are piloting or testing a stablecoin while seven are piloting or testing a tokenized deposit.

Bank projects

Several large banks have made moves in both tokenized deposits and stablecoins in recent months. 

Wells Fargo this fall will offer corporate and commercial clients the ability to move, program and settle funds at all times by using tokenized deposits. Wells Fargo says the program will cover U.S. dollars and British pounds for cross-border payments, with other clients, countries and currencies added in the next year. Wells Fargo is also part of a consortium of banks, including JPMorganChase, BMO, BNY, Citi, Citizens, Fifth Third and HSBC, that are developing a tokenized deposit network. The Clearing House will operate the network, which will connect traditional payment rails with digital asset rails. 

Banks are also working on stablecoins. BNY, Huntington Bank, Citizens Bank, U.S. Bank, American Express, Visa, Mastercard, Stripe, and Coinbase are among a group of companies that are backing a new stablecoin venture called Open Standard. Open Standard will issue a dollar-backed stablecoin, Open USD, later this year. Adyen, Affirm, Klarna, Chime, Google, Capital One's Brex, Standard Chartered, Nuvei, Ramp, Marqeta, Shopify, and Remitly are also part of the endeavor. While stablecoins are rarely used for payments, Open Standard's participants are anticipating demand in the future, particularly for cross-border transactions involving challenging currency exchanges. 

Writing for American Banker, OwlTing founder Darren Wang said Open Standard will be challenged to rival existing fintech-issued stablecoins, which have a head start with local regulators. 

Open Standard's "economics may well be better, and the partner list is real. What the consortium hasn't shown is a ground game, and Circle has a yearslong head start," Wang wrote.