BNY introduces tokenized deposits for institutions and ‘Digital Natives’

BNY, the world’s largest depository bank, said Friday it will issue digital representations of customers’ deposits on the blockchain.

In one blog postthe institution, co-founded by Alexander Hamilton, described the move as an important step in strengthening its ability to move “programmable, on-chain cash” across digital rails. The product is powered by the bank’s private and permissioned blockchain, BNY added. The product is aimed at both institutions and digital natives, it added.

BNY described its tokenized deposits as digital book entries that represent funds that participating customers could withdraw through traditional means. The bank said the tokens will initially be used in circumstances related to collateral and margin.

The move underscored how Wall Street incumbents are increasingly using digital assets as a way to expand their existing businesses. BNY highlighted the ability of tokenized deposits to “reduce settlement friction” and “improve liquidity efficiency” in various environments.

The company noted that while customers’ balances will be represented along the chain, they will continue to be recorded with BNY’s traditional systems for compliance purposes.

In a statement, BNY Chief Product and Innovation Officer Carolyn Weinberg underscored the trusted nature of the institution’s bank deposits. The bank, which has been around for more than 240 years, has secured $57.8 trillion in assets on behalf of clients since September. The New York-based behemoth also has $2.1 trillion in assets under management.

As competitors such as JPMorgan expand tokenized deposits on various networks, BNY said its version of the product will serve as “the connective tissue of BNY’s digital infrastructure,” which will be a tokenized money market fund with Goldman Sachs unveiled in July.

After establishing its Digital Assets unit in 2021, the company began managing private keys for customers the following year, with the debut of custody services for Bitcoin And Ethereum.

BNY’s blog post included statements from a dozen crypto-native companies, including crypto bank Anchorage Digital, stablecoin issuers Circle and Paxos, BlackRock-backed tokenization specialist Securitize and Ripple’s institutional prime brokerage platform, Ripple Prime.

“BNY taking this step to enable tokenized deposits is a milestone for digital cash adoption,” said Nathan McCauley, co-founder and CEO of Anchorage Digital.

Citadel effects, those said in July that it accounts for 25% of US stock volume, tokenization was also described as crucial to the future of finance. The market-making giant’s CEO, Ken Griffin, had done just that called in 2021 crypto a “jihadist call” against the US dollar.