BNY Mellon has taken a notable step in the evolution of digital money by launching tokenized deposits for institutional clients, signalling how major banks are adapting traditional cash to blockchain-based financial markets. The initiative allows eligible clients to use on-chain representations of bank deposits for settlement, collateral and margin workflows, without changing the legal nature of bank money.
The new service, announced this week, enables institutional clients of BNY Mellon to access digital representations of their existing deposit balances on a permissioned blockchain operated by the bank. The underlying deposits remain conventional bank liabilities, recorded on BNY’s core systems, while the tokens act as mirrored digital entries designed for use in specific institutional processes.
BNY positions the offering as an extension of its digital asset platform rather than a new form of money. Unlike stablecoins, the tokenized deposits are not freely transferable on public blockchains and remain fully embedded within the bank’s regulatory, compliance and risk management framework. For clients, the attraction lies in operational efficiency rather than monetary innovation.
The bank says the initial focus will be on use cases where traditional settlement frictions are most costly, such as collateral movements and margin payments. By enabling near real-time transfers within a controlled environment, BNY aims to support more continuous, 24/7 style market activity that increasingly characterises digital asset and derivatives trading.
The announcement places BNY alongside other large global banks experimenting with tokenized cash, as the industry searches for ways to connect legacy financial infrastructure with blockchain-based systems. Rather than competing directly with stablecoins or central bank digital currencies, tokenized deposits offer banks a way to keep money inside the regulated banking perimeter while still benefiting from programmability and faster settlement.
The launch underlines a key reality of the current phase of financial innovation. The future of digital money is not only about new currencies, but also about re-engineering how familiar bank deposits move, settle and interact with digital markets.