Author: Prathik Desai (The Token Dispatch)
Translated by: Foresight News TechFlow
Foresight News intro: Tokenized deposits are becoming a key way for major banks around the world to embrace blockchain. Platforms such as JPMorgan’s Kinexys already process tens of billions of dollars in daily transactions. However, the siloed consortium blockchain ledgers operated by individual commercial banks have confined tokenized deposits to each bank’s internal account system, leaving liquidity fragmented into isolated pools.
This predicament is remarkably similar to the history of New York banks in the mid-19th century, when the burden of clearing checks led to the creation of a centralized clearinghouse. Today, The Clearing House, the U.S. clearinghouse behind CHIPS and RTP, has teamed up with technology provider Quant to launch an on-chain money network, aiming to build a unified, real-time interbank settlement hub for commercial banks across the country.
Building an interoperable clearing layer for tokenized deposits is not just about seamlessly aligning the banking system with central bank reserves. It is also the key moat that will enable traditional financial institutions to compete with private stablecoins and reshape the ecosystem for around-the-clock, real-time payments.
Hello,
The core utility of money depends on its liquidity.
Imagine sending money to a friend who banks elsewhere: behind the scenes in your mobile banking app, the two banks clear and settle with each other, while the funds retain exactly the same value at both banks.
Over the past few years, commercial banks have been reshaping deposits for an always-on digital world, giving rise to tokenized deposits.
Major banks such as JPMorgan, Citibank, and HSBC have all launched tokenized deposit services.
These tokenized deposits can move in real time around the clock and are programmable. However, for now, they can operate only within specific, closed banking ecosystems.
Tokenized deposits are essentially claims on the issuing bank; other banks’ distributed ledgers cannot use them directly.
Although tokenized deposits are programmable, the hardest challenge is connecting them across different banking ecosystems.
In this article, I’ll take a deep dive into why an interoperability layer that breaks down banking barriers and allows tokenized deposits to flow freely between banks is the key to unlocking the greatest value.
Now, let’s get into it.
The Return of the Porters
On September 24, seven UK commercial banks completed two remortgage transactions in an unprecedented way.
The borrower’s funds remained locked in their personal account and continued to earn interest. The moment the transaction was finalized, the funds were released instantly—no one had to wait for the money to clear and arrive.
Seven banks, including Barclays, HSBC, Lloyds, and NatWest, worked together through a single shared platform.
UK Finance commissioned London-based software company Quant to build the network. Without this shared foundation, tokenized deposits issued by each bank would be isolated from one another.
The Bank for International Settlements (BIS) made the same point clearly in its September report.
Without interoperability, tokenized deposits cannot cross the “KYC boundaries” between commercial banks.
That means a token issued by my bank is meaningless on another bank’s ledger, because that bank has neither conducted due diligence on the issuing bank nor agreed to accept a claim against it.
This is the biggest bottleneck standing in the way of realizing today’s vision for asset tokenization.
A tokenized bond or fund is not truly settled until the asset and cash legs are exchanged instantaneously, in the same second.
Yet on today’s largest tokenized repo platform, securities are already on-chain, while cash settlement still relies on traditional bank clearing channels.
The global market for tokenized US Treasury funds has grown to around $14.5 billion, yet most of the money involved still uses outdated traditional settlement methods.
But this is no dead end. Financial history has already shown us how to solve similar problems.
In the early 1850s, commercial banks in New York relied on porters to walk across the city every day, carrying checks to one another for interbank settlement.
As more banks opened, this person-to-person clearing network collapsed completely.
In 1853, the banks joined forces to establish a single clearinghouse, where all checks payable were centrally netted and settled once each day.
This institution is today’s The Clearing House. It is jointly owned by around 25 of the largest commercial banks in the United States and operates two of the country’s core payment and clearing systems: CHIPS and RTP.
The new challenge banks face today is ensuring that tokenized deposits, distributed across the ledgers of commercial banks, can remain aligned in real time with central bank reserves—even on weekends.
To address this challenge, major banks are reaching a consensus on establishing a shared, common layer to centrally process interbank settlement of tokenized deposits issued by different banks.
On September 24, The Clearing House selected Quant through a competitive bidding process to operate the orchestration layer for its On-Chain Money network.
The network is expected to officially open to commercial banks across the United States in the first half of 2027.
A Once-in-a-Generation Strategic Window
Clearing layers in financial infrastructure have an almost natural tendency toward monopoly.
Once a country’s banking system has established a common rulebook and a shared settlement venue, that arrangement often remains unchanged for decades.
When The Clearing House launched its Real-Time Payments (RTP) network in 2017, it was hailed as the first new core payment system in the United States in more than 40 years.
That is the fundamental logic of this industry: when access to the critical technology stack and clearing seats opens up, once the core seats are occupied, the door closes for an entire generation.
In 2016, following a competitive bidding process, The Clearing House hired Vocalink, a company owned by a consortium of UK banks, to build the RTP network. Vocalink had already successfully developed the UK’s Faster Payments system.
Today, the RTP network processes around $7 billion in transactions each day. A decade later, The Clearing House has launched another tender and once again selected a technology builder from London.
What is different this time is that several foundational positions capable of capturing enormous value are opening up at once.
The wave of tokenized money is forcing every major banking system around the world to confront and answer the same question within a span of just 18 months.
In a single day, Quant secured the two largest domestic tokenized-money infrastructure contracts awarded to date in the UK and the US.
Meanwhile, the Society for Worldwide Interbank Financial Telecommunication (Swift) has chosen to build a shared ledger itself. Seventeen banks are already participating in the pilot, and Swift expects to expand it by the end of 2026 to include at least 19 banks across five fiat currencies.
Tech giants such as Chainlink, IBM, ACI, and Oracle are all vying to provide commercial banks with access to the network.
US regional banks, meanwhile, have jointly launched the Cari network, built on ZKsync.
The European Central Bank (ECB), on the other hand, has not hired a private orchestration provider at all. Its own Pontes link went live on September 21, enabling tokenized assets to be settled finally and directly in central bank reserves.
So what is the true core value of this central clearing position? The answer is liquidity efficiency.
CHIPS, The Clearing House’s system for clearing large-value payments, processed more than $2 trillion a day on average in 2025.
Thanks to its real-time multilateral netting and offsetting mechanism, commercial banks need to mobilize only about $96 billion in liquidity to settle payments. Without it, they would need to set aside as much as $442 billion.
The Clearing House estimates that the system saves its member banks as much as $5.5 billion in funding costs each year. That is the core power of an effective clearing layer: enabling the entire financial system to operate smoothly with only a fraction of the funds it would otherwise require.
By contrast, the largest bank token network today, JPMorgan’s Kinexys, has a daily transaction volume of around $7 billion.
That is only about 0.3% of CHIPS’ daily transaction volume, and it is limited to JPMorgan’s own customers. The industry’s current leader remains trapped in a walled garden.
This enormous gap represents a historic strategic opportunity. No matter how large an individual bank may be, it cannot bridge that gap alone. Only a shared clearing layer built by the industry can fundamentally break through.
Who Will Capture the Value?
This new kind of clearing layer will generate enormous economic value.
The business logic of bank-owned shared infrastructure has always worked this way: the $5.5 billion in annual funding-cost savings generated by CHIPS flows directly back to its member banks. The Clearing House is owned by the banks that use it, and its pricing model serves that same system.
Vocalink is a textbook example of a technology builder earning development fees while asset owners collect the rent.
It built the UK Faster Payments and US RTP networks, two core systems that move trillions of dollars. In 2016, Mastercard acquired a 92.4% stake in Vocalink for around £700 million, when Vocalink had annual revenue of £182 million.
That enormous premium went entirely to the UK banks that owned Vocalink. It was certainly a handsome exit for the technology builder, but the builder did not share in the long-term returns from the vast financial infrastructure it had created.
Today, Quant is deeply embedded in the shared tokenized-money infrastructure of two of the world’s leading financial centers.
If all goes well, it could grow into a technology company with significant valuation potential. But the bank consortia that lead and convene these networks will capture far more value than the technology provider itself.
Ultimately, the biggest winners are the ecosystem conveners and rule-makers, such as The Clearing House, UK Finance, and Swift.
Only institutions that control access rules, pricing power, and the setting of clearing standards can capture most of an ecosystem’s core value.
The next group to benefit will be the commercial banks that connect to the network early, including the many small and midsize banks.
There are 4,238 FDIC-insured banks in the United States, and 90% of them are community banks that simply cannot afford to operate their own independent blockchain nodes.
Quant’s solution, which enables small and midsize banks to issue tokenized deposits through The Clearing House, is the strongest case for a utility-scale shared network to counter JPMorgan’s dominance. Without this foundation, tokenized finance would become the exclusive preserve of Wall Street giants.
The potential structural risk is that commercial banks may eliminate fragmentation within their own clubs, only to recreate new liquidity barriers between different clubs.
Even within the United States alone, there are currently several networks and initiatives operating in parallel: The Clearing House network, Cari, Kinexys, and a joint stablecoin project involving 21 banks that is planned for 2027.
Huntington Bank and KeyBank’s participation in both Cari and The Clearing House is a vivid example of the fragmented yet overlapping tokenized-deposit ecosystem.
When commercial banks jointly control this “cross-chain translator,” it becomes a public utility—and utilities are rarely able to charge excessive tolls. Underlying interoperability is where value converges, and it is the prize every major player is competing for.
Interoperability sounds like a dry technical term, but its real significance goes far beyond that.
At its core, it is the dividing line between a “merchant gift card” and “universal fiat currency”: the former can be spent only at the issuing merchant, while the latter is accepted everywhere because everyone redeems it at face value, unconditionally.
It took the modern banking system more than a century to establish the ironclad principle that “a dollar at Bank A is worth exactly the same as a dollar at Bank B.” Central bankers call this the “singleness of money.”
Today’s siloed tokenized deposits have broken that principle, and an interbank interoperable clearing mechanism is the key piece needed to stitch it back together.
Connecting different ledgers is not difficult from a purely technical standpoint; they are already capable of communicating with one another.
The real challenge lies in establishing an access framework: which tokens issued by other banks is a bank willing to accept? What risk-control rulebook will govern that acceptance? And where will final clearing and settlement take place?
The UK’s answer is to settle using central bank reserves; the ECB has chosen to build its own direct link. In the US, The Clearing House is drafting the rules, while Quant is building the underlying interbank orchestration hub.
If the global banking system can successfully solve this problem, the financial world will undergo several far-reaching changes.
First, money will no longer be a slave to time.
In the traditional system, a transfer initiated on Friday evening often sits in the clearing channel until Monday, because the settlement system behind it has shut down for the weekend. Corporate treasurers are forced to keep large cash buffers idle to cover these settlement gaps.
Once bank funds can be cleared instantly between banks around the clock, this dormant liquidity can be fully reactivated.
Second, tokenized assets will finally have a genuine cash-settlement foundation.
Tokenized Treasury funds worth $14.5 billion, along with the repo and bond markets behind them, will be able to settle against fiat currency on the same blockchain rails in synchronized delivery-versus-payment (DvP) transactions.
The counterparty risk in traditional transactions—where one party has delivered the asset but the other party’s cash has not yet arrived—will disappear entirely. This is the core value of tokenization that matters most to large financial institutions, and the missing piece on the fiat side that has been absent for so long.
Third, asset size will no longer be an insurmountable moat.
JPMorgan can build its own token network only because of its enormous base of in-house customers. Small and midsize community banks have no such option.
Shared infrastructure enables the small and midsize institutions that make up 90% of US banks to access tokenized financial services on an equal footing with Wall Street’s top-tier banks.
The more far-reaching impact is the reshaping of the competitive landscape.
In the first decade after their emergence, decentralized stablecoins gained ground because their core selling point was that dollars should be transferable freely between any parties, around the clock.
Interoperable tokenized commercial bank deposits will inherit this 24/7 transfer capability while also retaining federal deposit insurance, interest-bearing checking accounts, and the capacity for compliant credit expansion—giving them a powerful advantage over private stablecoins.
Within a decade, the financial world will no longer make a point of referring to “tokenized deposits.”
They will become indistinguishable from ordinary bank deposits, just as no one goes out of their way to emphasize “electronic payments” anymore.
End users will never need to perceive the underlying clearing and settlement layer directly. It is precisely this invisible infrastructure, working quietly in the background, that gives it such extraordinary commercial value.
That’s all for today. See you next time.
Stay curious, Prathik