JPMorgan and Citi Plan Tokenized Deposit System to Rival Crypto

JPMorgan, Citi, and Bank of America are developing a tokenized deposit system via The Clearing House to compete with stablecoins like USDT and USDC.

According to a report by the Wall Street Journal, a new project is set to be built on the infrastructure of The Clearing House—the real-time payments company owned by leading American banks. This system will bridge traditional banking frameworks with blockchain technology, enabling faster, programmable transactions while ensuring funds never leave the regulated banking environment.

Banking Sector Responds to Stablecoin Pressure

The initiative arrives as stablecoins solidify their position as one of the fastest-growing categories in digital finance.

Assets such as USDT and USDC now facilitate hundreds of billions of dollars in monthly transaction volume, providing nearly instantaneous international transfers and 24/7 accessibility.

For traditional banks, this shift presents a significant challenge. Stablecoins merge value storage and payment processing into a single infrastructure, effectively reducing consumer reliance on classic banking services.

By implementing tokenized deposits, banks aim to provide similar functionalities—including programmable payments and near-instant settlement—while maintaining the regulatory oversight and protections inherent to the traditional financial system.

The Next Phase of Financial Tokenization

Unlike stablecoins, which represent the liabilities of private companies, tokenized deposits remain a direct liability of the issuing bank. This distinction is critical; regulators argue it preserves the “singleness of money”—the principle that all forms of bank-issued currency must be interchangeable and backed by a robust financial infrastructure.

This project reflects a broader industry shift from simple digitization toward the tokenization of assets.

While digitization merely moves existing processes into an electronic format, tokenization allows ownership and asset transfers to be embedded directly into blockchain networks via smart contracts.

This evolution creates opportunities for automated payments, reduced operational costs, and significantly accelerated transaction finality.

Regulations Accelerate the Transformation

The banks’ decision comes amid increasing regulatory clarity surrounding stablecoins. The GENIUS Act, passed in 2025, introduced requirements for full reserve backing, anti-money laundering measures, and stricter supervision of digital dollar issuers.

While this legislation legitimized the sector, it also underscored the need for traditional financial institutions to develop their own blockchain-based solutions to remain competitive.

Research from the Federal Reserve and the European Central Bank reveals that widespread stablecoin adoption could gradually erode bank deposit volumes. Such a shift might limit the ability of banks to provide credit and potentially weaken the effectiveness of monetary policy.

Tokenized deposits are viewed as a potential solution to this dilemma, allowing for payment innovation without capital exiting the banking system.

The move by JPMorgan, Citi, and Bank of America demonstrates that the world’s largest financial institutions no longer view blockchain as a threat, but as the next evolution of financial infrastructure. Rather than ceding the digital payments market to private stablecoin issuers, they are building a regulated alternative that could serve as the foundation for the future financial system.