US Banks Launch Tokenized Deposits to Counter Stablecoin Threat

A consortium of top US banks has introduced tokenized deposits in an effort to counter the rising popularity of stablecoins, which offer competitive interest rates on savings. The initiative, led by 16 major banks including Citigroup and JPMorgan Chase, aims to provide a regulated market-infrastructure solution for clearing and settling tokenized deposits.

The new system will connect on-chain payments with traditional fiat payment rails, enabling the 24/7 blockchain-based settlement of bank deposits. This move is seen as a response to the growing threat of stablecoins poaching depositors, who are increasingly turning to these alternatives due to their ability to earn interest.