More than 30 banks are actively exploring or piloting tokenized deposit use cases, with over 10 live PoCs or pilots already underway. According to Cornerstone Advisors’ 2026 report, 9% of banks plan to invest in or implement tokenized deposits in 2026 itself, while 57% have already discussed it at board or executive level.

ARK Invest’s Big Ideas 2026 report further underscores this momentum, projecting that the tokenized assets market could reach $11 trillion by 2030, with bank deposits playing a significantly larger role alongside sovereign debt and equities.

So, it wouldn’t be an understatement to say that deposit tokenization will become the next big innovation in banking

In this blog, we shall see what they are, how they work, and why so many banks are getting drawn towards tokenized deposits lately. 

What are Tokenized Deposits and How Do They Work? 

Tokenized deposits are the digital representation of funds held on a bank’s balance sheet,  available for redemption on a strict 1:1 ratio with traditional deposits. 

Because they exist on a shared, programmable ledger, they enable real-time settlement without intermediaries, eliminating the delays, reconciliation friction, and opacity of conventional systems.

That’s why, from  JP Morgan to HSBC to Citi, every bank is planning to launch their own tokenized deposits to address their specific use cases since their working has made room for next-gen use-cases to emerge  in payments, collateral management, and treasury operations.

Below is an example of how the HSBC tokenized deposit works on a surface level. 

Source: HSBC

Why Are Banks Getting Drawn Towards Tokenized Deposits?

At the moment, the banking sector has been plagued by infrastructure bottlenecks, forcing it to face multiple challenges in three critical segments; 

1. Intraday and Collateral Movement

As per the BCG Report, every year, banks are losing close to $20B USD annually in global clearing and settlement costs, and close to ~$19 trillion in global collaterals remain outstanding across repurchase agreements (repos), OTC derivatives, and securities lending.

But banks are not able to  free up this capital because of  legacy  banking models streamlining   Intraday settlements and collateral movements, where settlements are processed in batch cycles instead of on a real-time basis.

For streamlining faster  settlements, banks will have to completely overhaul their tech infrastructure and add/ launch stablecoin support. That’s hard to start with because of operational and regulatory concerns. 

Tokenized Deposits natively integrate with the existing banking infrastructure to help them overcome the batch processing cycles, thereby, allowing them to free up capital. As a result, banks can use this trapped liquidity for revenue generation  since they can do the following things which they couldn’t with the legacy systems; 

• Atomic Delivery vs Payment: Using tokenized Deposits, the cash leg and collateral leg can settle instantly in a single settlement  to eliminate any counterparty risks to avoid capital locks. 

• Programmable Intraday Repo: Smart-contracts can be programmed to open at multiple times of the day to eliminate batch processing. This frees trapped liquidity of the banks to use the same for their operational purposes.  

• Tripartite Collateral Velocity: Tokenized collaterals could be broadly used for multiple purposes across a wider spectrum of operations. Thereby, unlocking the collaterals which were previously locked in batch settlements and they were getting queued due to the difference in settlement times. 

Real-world Banking Examples Demonstrating   Tokenized Deposits Efficacy   in Intraday Settlements and Collateral Movements

A. JP Morgan Using the  Kinexys Platform For Intraday Settlements 

JP Morgan is one of the most prominent names rolling out the usage of  tokenized deposits to overhaul intraday settlements and collateral movements. They initially started with Onyx which was rebranded as Kinexys. 

It uses the HQLAᵡ platform where repo traders swap cash held at JP Morgan for securities on HQLAᵡ using tokenized deposit accounts on the Kinexys network. All settlements are near-instantaneous (atomic DvP) with no delay and minimal cost.

So far, due to this advantage, the Kinexys platform has achieved the following milestones undertaking intraday settlements and collateral movements handling.

B. HSBC Using Tokenized Deposits to Streamline Treasury Settlements for Businesses 

HSBC  launched the tokenized deposit service for its corporate clients in Hong Kong, US, and Luxembourg, where the platform is supporting payments in multiple currencies like the pound, euro and U.S. dollar in treasury settlements. 

So far they have initiated the real time intraday transfer for treasury settlements for its corporate client ANT international using tokenized deposits. It is expected as per the official claims that they are planning to expand these  services to their other clients who are  based in the Singapore and UAE region shortly.

 

2. Cross Border Payments

 

Cross border payment volume is growing at an exponential rate. For example, in the year 2024, it was at around $194T and expected to grow to  $320 trillion by 2032 as per JP Morgan’s report. 

However, when you look at banks’ role in facilitating cross border payments, they are slowly getting pounded with time. 

And this is primarily happening because banks are not able to match what Fintechs players could deliver like ; 

• Reducing the cost of remittance to less than 3% as per SDG Goals. 
• Optimizing the speed so that cross border payments are credited near instantly 
• Providing access to micro, small and medium-sized enterprises (MSMEs) allowing them to enjoy one faster payment rail.
• Enabling  maximum capital efficiency because more than $27T is locked in a prefunded Nostro/Vostro account in FX currencies, exposing the counterparties to FX and other risks.

Tokenized deposits help  banks overcome all these challenges because they streamline  faster settlements, abstracting the need for  SWIFT based settlements, where the messaging comes first and settlement follows thereafter because of a correspondent banking structure. 

Which means, instead of the 4 to 7 days settlement delays, tokenized deposits can process transactions in real time by reconciling interbank communication on a real-time basis. Moreover, with tokenized deposits, banks are also able to protect the customer’s interest against FX risks and opacity in settling transactions. 

Real-World Banking Examples Demonstrating   Tokenized Deposits Efficacy  In  Cross Border Payments 

1. Project Agro  Streamlining faster Settlements Using Tokenized Deposit 

Project Agro is the collaboration of seven central banks and over 40+ financial institutions  using tokenized deposit to test the desirability, feasibility and viability of a multi-currency unified ledger for wholesale cross-border payments. 

So far, they have moved from the test to the Pilot phase with central and commercial banks already actively involved in the pilot phases. It is expected that the project will be going in full swing by the end of 2026. 

2. Lloyds Banking Group

LLoyds Banking Group is another bank which has actively used tokenized deposits for making cross border payments. They were involved in buying Tokenised Gilt from Archax using tokenized deposits as a mode of payment. 

They demonstrated how transactions can quickly flow from a traditional banking system to blockchain rails. And businesses can use the benefits of smart contracts in a regulated financial setup.

3. Remortaging 

Conveyance fraud which means email hacking and redirection of mortgage/remortgage funds, is ending up as a major challenge for banks when they are acting as an intermediary (or often termed as warehouse lenders)  in processing Authorised Push Payment to mortgage companies in remortgaging transactions. 

This is primarily happening because banks have no means to validate whether the request is coming from an authorized party while processing the remortgaging transactions.

In 2024 alone, the fraudsters have been able to steal£1.17 billion  because they could hack  emails of mortgage companies and customers,  replacing  their  account details with  confirmation from authorized users or victims of conveyance fraud, allowing the banks to transfer the funds to their account. 

Due to this, banks are ending up as ultimate losers because they have to initiate the Authorized Push Payment anticipating that it is coming from authorities parties but  in the event of fraud, they are forced to pay to such victims. 

In 2024, more than 59% of the APP fraud losses were reimbursed to victims, putting pressure on banks where they had to pay $450 M. But in the absence of technology that can validate the same in a transparent manner, they are left with no option. 

Tokenized deposits provide that  edge to banks where they can first validate the transaction and then allow the fund movement. This happens because banks are  able to  track all the details and initiate the fund transfer due to the shared nature of the ledger. Thereby protecting them from falling victim of the conveyance fraud during remortgaging events. 

Real-World Banking Examples Demonstrating   Tokenized Deposits Helping in Remortaging 

A. UK Finance 

UK Finance,  a British trade association for the UK banking and financial services sector, has launched the GBTD program under which they are planning to convert the traditional sterling commercial bank money into tokenized deposits. 

They have already launched a collaborative pilot programme with Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander banks which demonstrate initial success since it has already moved from concept of  Regulated Liability Network to Live Pilots with real-time demonstration. 

For tokenized deposits, such integration  across multiple verticals   is just the first step in their long extended journey since with  programmability, transparency, instant settlements and ability to integrate with existing infrastructure, a lot of new fronts can also be explored in the banking vertical. 

So, if you also have some idea that you can capitalize on and are looking for a trusted partner that can help you launch your banking use-cases with tokenized deposits acting as an integration, settlement or a programmable layer, Zeeve can help you in this regard. 

Build Your Banking Use Case with Zeeve Using Tokenized Deposits 

With a SOC2 and ISO-aligned operating posture, Zeeve is well positioned to help bring enterprise rigor to your blockchain infrastructure. 

With expertise across public, private, hybrid, and ZK-enabled systems, we can help you build your tokenized deposit solution that can fully resolve the banking problem that you intend to solve. 

Moreover, we also value regulatory pressure that banks have to face and for that matter, we provide the Zeeve’s Privacy Layer that enables  you to innovate while staying completely confidential across execution, data, and verification using zero-knowledge systems. For banks this is a win-win situation because regulatory obstacles stifle innovation in banking.

Our advisory and engineering team supports the full journey from protocol and architecture advisory, use case and economic design, and hands-on support for privacy and compliance integration. In production, banks get always-on monitoring, incident management, upgrade orchestration, and production-grade SLAs.

Zeeve has already powered 20+ production chains processing 2B+ transactions monthly, and we have the capability to generate the same results for  you too! 

Schedule a call today if you are looking for a reliable technology partner that can help you innovate while staying compliant!