In brief
- BNY said that it will begin issuing tokenized deposits.
- The product relies on the bank’s private and permissioned blockchain.
- The institution described the tokens as its connective tissue to crypto.
BNY, the world’s largest custodian bank, signaled on Friday that it will begin issuing digital representations of customers’ deposits on the blockchain.
In a blog post, the institution co-founded by Alexander Hamilton described the move as a key step in bolstering 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 for both institutions and “digital natives,” it added.
BNY described its tokenized deposits as digital book entries representing funds that participating clients would be able to 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 augment their existing businesses. BNY highlighted the ability of tokenized deposits to “reduce settlement friction” and “improve liquidity efficiency” in various settings.
The company noted that clients’ balances, although they will be represented on-chain, 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 existed for more than 240 years, safeguarded $57.8 trillion in assets on behalf of clients, as of September. The New York-based behemoth also has $2.1 trillion in assets under management.
As competitors like JPMorgan expand tokenized deposits to various networks, BNY said that its version of the product will serve as “the connective tissue of BNY’s digital infrastructure,” which includes a tokenized money-market fund with Goldman Sachs that was unveiled in July.
After forming its digital assets unit in 2021, the company started managing private keys for clients the following year, with the debut of custody services for Bitcoin and Ethereum.
BNY’s blog post included statements from around a dozen crypto-native firms, 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 moment for digital cash adoption,” Anchorage Digital co-founder and CEO Nathan McCauley said.
Citadel Securities, which said in July that it accounts for 25% of U.S. equity volume, also described tokenization as crucial for the future of finance. The market-making giant’s CEO, Ken Griffin, had in 2021 called crypto a “jihadist call” against the U.S. dollar.
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