Banks Create Their Own Digital Dollar Alternative to Stablecoins

Tokenized deposits are digital representations of commercial bank deposits on a blockchain, issued by banks themselves and maintaining a one-to-one relationship with money on their balance sheets.

The concept is gaining traction, with SWIFT launching a shared ledger for 17 global banks in July, JPMorgan's Kinexys settling institutional payments using tokenized deposits today, and a consortium of American banking giants targeting a 2027 network.

The key difference between tokenized deposits and stablecoins lies in where the money sits. Tokenized deposits remain on the bank's balance sheet, funding loans as usual, while stablecoins pull deposits out of banks into reserve assets.