Tokenized Deposits Will Not Scale in Silos

Banks are not looking at tokenized deposits because blockchain suddenly became popular. They are looking because stablecoins proved there is real demand for money that moves outside traditional banking hours. As of July 2026, the stablecoin market is worth more than $300 billion. That did not happen because people suddenly became interested in blockchain infrastructure. It happened because stablecoins solved a real problem. They can move across borders, follow programmed rules and settle without waiting for a bank to open on Monday morning.

Stablecoins also showed banks what happens when they wait too long to improve how deposit money works. Other companies step in and build the financial products customers want. That is the real issue. Tokenized deposits give banks a way to modernize money without giving up the deposit relationship.

A tokenized deposit is still a bank deposit. It is still money the bank owes its customer. The technology changes how the deposit is recorded and moved, but it does not need to become a privately issued stablecoin backed by a separate pool of assets. McKinsey made a similar point in its May 2026 article, “Beyond stablecoins: The emerging architecture of on-chain money.” Tokenized deposits, stablecoins and central bank money may all become part of the same digital financial system.

That matters because deposits are still the foundation of banking. They fund loans, keep customers connected to the bank and already exist inside a legal and regulatory system people understand. Banks should tokenize deposits, but issuing the token is only the first step. The harder question is where that tokenized deposit can go.

A tokenized deposit is not useful if it is stuck

A tokenized deposit issued by one bank will not automatically work with another bank, another consortium, central bank money or a foreign payment network. Without interoperability, banks could end up rebuilding the same silos they already have. They may be faster silos with better technology and more functionality, but they are still silos.

It is also important to be clear about what interoperability does and does not mean. A deposit at Bank A is not the same as a deposit at Bank B. They are liabilities of different banks. They sit on different balance sheets and carry different risks. Interoperability does not erase those differences.

It simply allows the systems to communicate. They can exchange payment instructions, move value, verify rules and coordinate settlement. Banks will still need governance, liquidity, compliance, privacy and clear settlement rules. Interoperability does not replace any of that. It makes it possible for separate systems to work together without pretending they are the same system.

One network will not be enough

Several large U.S. banks are working with The Clearing House on a shared tokenized deposit network expected to launch in the first half of 2027. That is an important step. It also shows that large banks understand where the market is going. Customers want money that moves faster. They want longer operating hours and fewer delays between payment and settlement.

A shared network can help solve that problem for its members, but one consortium will not solve the whole problem. Not every bank will join the same network, and not every bank will choose the same technology provider. Banks will have different customers, regulators, privacy requirements and risk limits. Some may build their own systems. Others may join a shared network. Many will rely on a core banking company, payment network or outside technology provider.

The problem starts when those systems cannot communicate without another custom integration and another reconciliation process. Blockchain was supposed to reduce that kind of work. It will not happen on its own.

“We can add it later” is a bad plan

Banks should not treat interoperability as something they can add after a pilot works. The idea sounds reasonable at first. Start small, prove the concept and add outside connections later. The problem is that early decisions shape the foundation of the whole system.

A bank launches a pilot for one use case. The project gains support and customers begin using it. Then someone wants to connect to another network or settle against a different asset. That is when the bank may discover the system was never built to do it. Changing the architecture is now expensive. It takes time and may force the bank to depend even more heavily on the original vendor.

That is how new technology becomes old infrastructure.

I saw a different version of this during earlier blockchain cycles. Companies built products before customers really needed them. The technology often worked, but the timing did not. Tokenized deposits have the opposite problem. The need is already here.

Stablecoins have created pressure. Banks want to protect deposits. Corporate treasury teams want faster settlement and better access to their cash. Customers are starting to expect financial products to work outside traditional banking hours. Timing is not the main risk anymore. The architecture is.

Every closed-loop tokenized deposit system is making a bet that one network, one vendor, one consortium and one settlement model will be enough. That is a risky bet because no one knows which payment networks will matter five years from now. No one knows which consortiums will grow, which will shrink or how new regulations will change the way digital money moves. A payment that looks domestic today may need to settle across borders tomorrow. A bank may need to connect to a network that does not exist yet.

Interoperability gives banks room to adjust.

Project Agorá shows what this could look like

The Bank for International Settlements’ Project Agorá offers a useful example of where this may be heading. The initiative brought together eight central banks and more than 40 financial institutions to explore how tokenized commercial bank deposits and tokenized central bank reserves could support wholesale cross-border payments.

In May 2026, the BIS announced that the prototype had demonstrated atomic, multi-currency settlement. In plain language, the different parts of a transaction could settle together. One part would not complete while another failed. The system could also support around-the-clock settlement if it were eventually implemented.

Project Agorá is still an experiment. It is not a live global payment network, and it does not prove that every bank and central bank will use the same ledger. What it does show is that different types of regulated money will need to work together.

Commercial bank deposits will need to interact with central bank money. They may also need to settle against securities, foreign currencies and other tokenized assets. Some of that activity may happen on shared platforms. Some will happen across separate networks. Banks need to be ready for both.

Ask where the deposit can move

Before launching a tokenized deposit product, a bank should ask one simple question: Where can this deposit move?

Can it move only between our own customers, or can it reach another bank or consortium? Can it settle against a tokenized bond or Treasury? Can it meet privacy and compliance requirements without forcing every participant onto the same system? Most important, can we change direction later without rebuilding everything?

These are not just technology questions. They are business questions. A deposit that moves only inside one closed environment can still have value. It may improve internal payments or support a specific group of customers, but it will not become the foundation of digital commercial banking if it cannot move beyond that environment. Money becomes more useful when it has reach.

Stablecoins and tokenized deposits will co-exist. Banks do not need to pretend one will completely replace the other, but they do need to make sure bank money remains useful wherever customers want to use it.

Tokenized deposits are a strong answer for banks because they keep the deposit inside the banking system. They protect the customer relationship and fit more naturally within existing regulation. But they will only scale if they can work across the wider market.

Banks should assume there will be many ledgers, networks and technology providers. Public, private and permissioned systems will coexist. Customers will expect them to connect.

The winners will not simply be the first banks to issue a tokenized deposit. They will be the banks that make those deposits useful in more places, with the right controls and without creating another closed network.

The value is not just in the token. It is where the token can go.

About Ian Kane

Ian Kane is Head of Partnerships at Cosmos, where he works with banks, financial institutions and technology providers on tokenized deposits, digital assets and interoperability. He has spent more than a decade building companies, partnerships and go-to-market strategies across fintech, payments and blockchain.