Banks Embrace Tokenized Deposits to Stay Ahead of Digital Money

Banks are increasingly exploring tokenized deposits as a way to integrate traditional commercial bank money into blockchain-based payment and settlement systems. This move is part of a broader trend towards digitizing financial transactions, with the goal of positioning banks at the center of digital money flows.

According to a new report from RWA.io, in collaboration with UK Finance and several major banks, tokenized deposits are emerging as a key component of the on-chain cash stack for the financial system. Unlike stablecoins, which are often backed by complex algorithms or reserve assets, tokenized deposits are direct liabilities of the issuing bank and remain governed by existing banking frameworks.

The report highlights recent pilots and deployments across Europe, including the UK's first public blockchain transaction using tokenized deposits on the Canton Network. The European Central Bank is also advancing its digital euro program, with plans to begin a 12-month pilot in 2027. This development comes as policymakers seek to balance innovation with safety, and banks, fintechs, and custodians explore how tokenized assets and on-chain settlement fit within existing regulatory and supervisory regimes.