While the Clarity Act remains stalled in Congress over the contentious issue of passive yield on non-bank stablecoins, several of the country’s largest banks and a group of regional lenders are moving forward with their own form of programmable digital money: tokenized bank deposits.  These are direct liabilities of regulated banks, backed 1:1 by customer deposits and designed to operate on public or permissioned blockchains. They offer 24/7 instant settlement and programmability while keeping funds on the issuing bank’s balance sheet and within the existing regulatory perimeter — including Federal Deposit Insurance Corp. protections where applicable. 

The activity underscores a broader push by traditional banks to participate in blockchain-based payments without ceding ground to crypto-native stablecoin issuers.  JPMorgan launched its USD deposit token, JPMD (formerly JPM Coin), for institutional clients on Coinbase’s Base Ethereum Layer-2 network in November 2025. The rollout followed successful pilots involving Mastercard, Coinbase and B2C2, enabling near-instant, 24/7 peer-to-peer transfers. The bank has announced plans for a phased native issuance of JPMD on Digital Asset’s Canton Network throughout 2026, expanding interoperability for institutional clients. 

On Jan. 9, BNY Mellon — one of the world’s largest custodians — launched a tokenized deposit service that creates on-chain mirrored representations of client demand deposits. The initial focus supports collateral and margin workflows for institutional participants, including Intercontinental Exchange (ICE), Citadel Securities, DRW Holdings, Ripple Labs and Circle. 

Even smaller institutions are collaborating. In March 2026, five regional banks — Huntington Bancshares, First Horizon, M&T Bank, KeyCorp and Old National Bancorp — announced the Cari Network on ZKsync. The bank-governed platform aims to enable issuance and transfer of tokenized deposits across a shared blockchain infrastructure, with participating institutions collectively holding more than $600 billion in deposits. 

 How tokenized deposits differ from stablecoins 

Tokenized bank deposits function as digital versions of traditional commercial bank money. Key features include:

• Direct claims against the issuing bank rather than third-party issuers.
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• Full integration with existing banking regulations and safeguards.
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• 24/7 settlement and programmability on blockchain rails.
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• Composability with wallets, enterprise systems and potentially DeFi protocols.

 

Banks view these tokens as a way to modernize payments and meet client demand for faster, more efficient rails while retaining control over deposits and lending capacity. 

Ongoing regulatory tension

The developments come amid intense lobbying by banks and their trade groups in the Clarity Act negotiations. Banks have pushed to prohibit passive yield or rewards on non-bank stablecoins, arguing that such features could trigger deposit flight, reduce lending and threaten financial stability.  Critics have noted the apparent contrast: tokenized deposits issued by banks can legally pay interest under existing rules, potentially offering similar or greater utility in the same on-chain environment that non-bank stablecoins are being restricted from accessing at scale. 

However, it is far from clear that banks will prevail on this point. A White House Council of Economic Advisers report released on April 8 found that a ban on stablecoin yield would boost bank lending by only an estimated $2.1 billion — a negligible 0.02% increase relative to the overall U.S. banking system. The analysis has fueled questions about the strength of the economic rationale behind the proposed restrictions.

Billions at stake 

Banks are investing hundreds of millions — and potentially billions — in the technology, compliance, smart-contract development, and operational infrastructure required to scale tokenized deposit rails.  Executives have emphasized in both public statements and private discussions that these investments make economic sense only with a clear, supportive regulatory framework. Legislation such as the Clarity Act, or a comparable comprehensive stablecoin bill, is seen by many in the industry as essential to providing the legal certainty and policy predictability needed to justify the capital outlay and long-term commitment.

Without such clarity, banks risk building advanced infrastructure in an environment that could later be disrupted by shifting rules or enforcement priorities. With it, tokenized deposits could become a meaningful complement — or competitor — to non-bank stablecoins in the evolving payments landscape. 

Broader implications

The rapid rollout of tokenized deposits reflects a competitive dynamic that is still unfolding. Traditional banks are actively developing on-chain capabilities to serve institutional clients and modernize money movement, while non-bank stablecoin issuers continue to expand use cases for payments, remittances and programmable finance. 

For fintech founders, crypto-native companies, and institutional users, the outcome of the Clarity Act debate — particularly on yield — will help shape the competitive balance between bank-issued tokens and independent stablecoins. Faster, cheaper cross-border settlement, real-time treasury tools, and hybrid payment systems are all on the horizon, but the precise mix of players and products remains to be determined. 

ACT Capital Advisors, a specialized fintech and crypto M&A advisory firm, continues to monitor these developments closely. The firm advises clients that success in this environment will depend on strategic positioning amid ongoing regulatory negotiations and rapid technological change by both traditional banks and digital asset innovators.  As tokenized bank deposits move from pilots toward broader production in 2026, the future of programmable money will be shaped by how regulators ultimately balance innovation, competition and financial stability.

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Central Valley resident Neil Paschall is a managing director of Washington-based ACT Capital Advisors. Read his previous column, America’s high stakes reset of global trade power through tariffs, digital innovation.