JPMorgan, Citi and other banks to launch tokenized deposit system to rival crypto in 2027

Major U.S. banks including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo have set up a partnership aimed at building a joint tokenized deposit network through the Clearing House, and are targeting a 2027 launch in a move to counter stablecoin and crypto taking over payments and corporate finance.

This comes in the wake of the potential signing of the CLARITY Act into law, and the banks believe this could be a big move for the future of traditional finance.

JPMorgan, others turn to blockchain

The Clearing House, a real-time payment network jointly owned by all the participating banks, will operate this new system, according to the Wall Street Journal. This payment network would allow member banks across the United States to move tokenized versions of customer deposits over blockchain infrastructure 24/7.

Clearing House CEO David Watson told the WSJ that the initiative represents “a big move for the banks” and that the industry faces a “radically different” future as regarding on-chain payments and finance. The report mentions that no particular blockchain partner has been chosen for the systems’ operations yet. Internally, some banks have referred to the project as “the bridge,” while others have called it “the chain.”

Tokenized deposits are different from stablecoins as they represent actual bank deposits recorded on a blockchain rather than a separate digital asset. This distinction preserves the pre-existing credit risk profile that JPMorgan and others already operate with, alongside the regulations and accounting framework.

Stablecoin competition hits even harder

The new tokenized deposit initiative comes as JPMorgan and the other banks see crypto firms push deeper into territory that had previously been long dominated by traditional finance. Large US banks have grown increasingly concerned about the potential of stablecoins to take more liquidity away from the banking system if crypto companies are allowed to gain more traction with the banking industry’s consumers and corporate clients.

The CLARITY Act stablecoin legislation advancing in Washington has further worsened the concern. Banks remain dissatisfied that proposed rules leave room for stablecoin interest features, while crypto firms have described the present proposal as a compromise. The tokenized deposit approach allows JPMorgan and the other banks to keep funds within the regulated banking system

Corporations expected to adopt early

Large multinational corporations are expected to adopt this deposit early and be among the network’s first users, with its potential uses like cross-border payments and liquidity management being attractive to this client base.

Citi’s head of services, Shahmir Khaliq, said that the network is another step putting banks in a position of strength in capital markets and financing. Bank of America’s head of global payments solutions, Mark Monaco, offered a more measured view, mentioning that clients are not “beating down the door” for tokenized deposits but that some interest exists and the network would help banks prepare for more adoption.

JPMorgan has the most experience among this group of banks, with the existence of the JPM Coin for internal institutional payments available on its private blockchain. JPMorgan has also launched a deposit token on Base, popular U.S. exchange Coinbase Global’s public blockchain, with access restricted to institutional clients.

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