The Bank of New York Mellon is testing tokenised deposits to let clients move money over blockchain rails, the bank said. The work is part of a push this year by the bank’s Treasury Services unit to modernise real-time, instant, and cross-border payments. 

The effort would convert bank deposits into transferable digital coins. The goal is faster settlement and round-the-clock payments while keeping the bank’s large payment flows under control, Bloomberg reported.

What are tokenised deposits?

A tokenised deposit is a bank-issued digital coin that stands for a claim on commercial bank money. The token lives on a distributed ledger. If a client sends a token, the recipient gains the claim to that deposit. 

The record is stored onchain so transfers can settle near-instantly. That differs from old correspondent networks that work only at set times and often need intermediaries.

Also Read: Qatar National Bank Partners With JPMorgan Blockchain To Enable Faster USD Payments

Why is BNY testing them?

BNY’s Treasury Services processes about $2.5 trillion in payments a day. The bank also oversees about $55.8 trillion in assets under custody or administration. Moving some of that value to token form could cut delays. 

It could let clients settle trades and move cash at any hour of the day. The bank says tokenised deposits may help overcome legacy technology limits inside its own systems. Over time, standards could let different banks link their token systems together.

How do the tests fit with other moves?

Global banks are running similar pilots as JPMorgan tested a USD deposit token called JPMD on the Base network earlier in the year. HSBC has rolled out a token deposit service for corporate clients to help with cross-border payments. 

Payment network SWIFT is building a shared ledger prototype for real-time cross-border flows. BNY has also worked on tokenised record-keeping with other firms. 

In July, the bank partnered with Goldman Sachs to hold token records of money market fund ownership. That work aimed to speed collateral moves and settlement.

Practical benefits and use cases

Tokenised cash can cut the time between trade and payment, and it can let markets run 24/7. It can reduce the number of intermediaries in a deal. For banks and large clients, this may lower costs and friction on some flows. 

For markets that trade tokenised assets, having onchain cash that moves with those assets could make settlement simpler.

There are gaps to fill before broad use, and banks must decide how tokens map to legal claims on deposits. Custody rules need clarity as firms will have to test how token transfers interact with existing ledgers and clearing systems. 

Cyber risk and operational resilience are also concerns. The bank will need ways to halt or correct transfers in case of error. Standards and market rules must evolve so that different systems can talk to each other.

Also Read: Reserve Bank Of India To Launch Pilot On Deposit Tokenisation This Wednesday