BNY Advances Tokenized Push Despite Crypto Caution

BNY Mellon, the world's largest custodial bank with $55.8 trillion in assets under custody, is exploring tokenized deposits to modernize its $2.5 trillion daily payment network, according to Bloomberg. The initiative aims to enable near-instant settlement, reduce transaction costs, and overcome limitations of legacy systems by leveraging blockchain technology. Tokenized deposits would represent digital coins backed one-to-one by commercial bank money, differing from stablecoins that often rely on third-party reserves. The project, still in the exploratory phase, could allow clients to transfer funds 24/7, enhancing efficiency in cross-border and real-time payments BNY Mellon Trials Blockchain Deposits to Overhaul $2.5T^[1].

The effort aligns with a broader industry shift toward blockchain-based finance. BNY's Treasury Services unit, led by Executive Platform Owner Carl Slabicki, views tokenized deposits as a way to streamline operations within its own ecosystems and eventually across the broader financial system. "Tokenized deposits can help banks overcome legacy technology constraints, making it easier to move deposits and payments across their own ecosystems – and eventually, across the broader market as standards mature," Slabicki stated. The initiative positions BNY to compete with peers like JPMorgan, which launched its JPMD token on Coinbase's Base blockchain in June, and HSBC, which recently introduced a cross-border tokenized deposit service BNY Eyes Blockchain for Real-Time Tokenized Payments^[2].

BNY is not alone in this pursuit. Over 30 institutions, including SWIFT, are collaborating on a shared blockchain-based ledger for real-time international payments. In July, BNY partnered with Goldman Sachs to offer tokenized money market funds, recording ownership on Goldman's private blockchain. This collaboration aims to provide institutional clients with real-time settlement and round-the-clock access to traditional financial markets. The initiative has drawn participation from major players such as BlackRock, Fidelity, and Federated Hermes. Additionally, BNY is part of a pilot with SBI Shinsei Bank and Singapore's Partior to develop a blockchain framework for multicurrency tokenized deposits BNY Mellon weighs tokenized deposits to address legacy payment constraints^[3].

Despite these advancements, BNY's CEO, Robin Vince, has emphasized a cautious approach to crypto deposits, stating the bank would not pursue them as aggressively as some competitors. However, the institution remains active in tokenization efforts, including its recent partnership with SWIFT and its work on tokenized money market funds. Vince's stance reflects a strategic balance between innovation and risk management, ensuring alignment with regulatory and operational standards BNY Mellon Trials Blockchain Deposits to Overhaul $2.5T^[1].

The potential impact of tokenized deposits extends beyond BNY. Slabicki highlighted their role in reshaping treasury services, enabling intraday liquidity optimization, supply-chain finance, and real-time corporate payments. By collapsing traditional netting cycles and manual reconciliations into secure, auditable ledger entries, tokenization could unlock new revenue streams and enhance client engagement through predictive analytics. Slabicki anticipates that banks and market infrastructures will link token networks to systems like SWIFT, FedNow, and RTGS via compliant bridges, fostering interoperability without overhauling existing infrastructure ‘Stablecoins and tokenized deposits will be complementary, not cannibalistic’ BNY’s Carl Slabicki on the next chapter for treasury^[4].

Industry experts note that the success of tokenized deposits hinges on standardization and regulatory alignment. Challenges include harmonizing ISO 20022 messaging, cut-off policies, and cross-border compliance. Slabicki advocates for industry collaboration to address these hurdles, emphasizing that the future of payments will likely involve hybrid upgrades rather than complete replacements of legacy systems. "By building on proven success stories and standardizing the rulebooks behind them, we can expand instant settlement into new corridors - and ultimately achieve truly seamless, 24/7 cross-border value movement," he asserted ‘Stablecoins and tokenized deposits will be complementary, not cannibalistic’ BNY’s Carl Slabicki on the next chapter for treasury^[4].

As BNY and other institutions advance tokenization, the financial sector is witnessing a paradigm shift. Tokenized deposits and stablecoins are expected to coexist as complementary tools, enhancing liquidity and operational efficiency. This evolution underscores the growing integration of blockchain into traditional finance, with BNY's $2.5 trillion payment network serving as a testbed for broader adoption. The outcomes of these trials could redefine global payment systems, accelerating the transition to a digital-first economy BNY Mellon weighs tokenized deposits to address legacy payment constraints^[3].