Banks to settle tokenized deposits on-chain 24/7

The Clearing House, owned by 25 large U.S. banks, announced on June 5 that it is developing a system to clear and settle tokenized commercial bank deposits on-chain around the clock. The system will connect blockchain-based activity to established fiat rails, including RTP and CHIPS, and keep those deposits on banks’ balance sheets rather than converting them into stablecoins.

The proposed network is described as supporting richer transaction data, automated workflows and programmable settlement. It would provide a controlled connectivity layer between on-chain transactions and existing payment infrastructure, allowing tokenized deposits to move between banks while preserving regulatory controls tied to bank deposit accounts.

The Clearing House cited its existing DDA Token Service as a precedent. That service replaces customer account numbers with tokens and retains the ability to translate tokens back to account numbers for processing and compliance.

Regulatory changes shaped the design. The GENIUS Act sets a framework for payment stablecoins, requires one-to-one reserves for permitted issuers and bars issuer-paid interest solely for holding a payment stablecoin. The act excludes deposits recorded using distributed-ledger technology from the payment stablecoin definition. The FDIC’s April proposal said deposit insurance treatment does not depend on whether an insured depository institution records deposit liabilities using distributed-ledger technology, and it said deposits held as reserves backing a payment stablecoin would not be pass-through insured to stablecoin holders. The Office of the Comptroller of the Currency has proposed rules to implement the GENIUS Act for permitted and foreign payment stablecoin issuers.

Market data in early June showed the stablecoin sector with roughly $296 billion in market capitalization, with two major tokens accounting for most of that figure. Research from Citi projected substantial stablecoin issuance by 2030, with a base-case forecast of $1.9 trillion and a bull-case forecast of $4.0 trillion. Citi’s analysis also projected that bank-issued tokenized deposits could coexist with or outpace stablecoins in transaction volumes by 2030, citing issues such as pre-funding and fragmentation that affect institutional settlement using current stablecoins.

Industry groups and regulators have flagged risks tied to stablecoin yields and incentives. Banking trade associations warned lawmakers that yield-like incentives associated with stablecoins could reduce deposit balances held in banks. The Council of Economic Advisers produced modeled estimates of potential lending impacts ranging from about $2.1 billion in a baseline scenario to as much as $531 billion under a stacked worst-case scenario. The Federal Reserve noted that stablecoins’ effects on bank funding depend on where demand comes from, how issuers invest reserves and whether issuers gain access to central-bank accounts.

The Clearing House’s announcement left several operational questions open. The organization did not provide a launch date, specify the ledger design, publish detailed operating rules or define the extent of interoperability with public blockchains.

The Clearing House described the service as enabling dollar-denominated token settlement while preserving the legal status, balance-sheet treatment and compliance controls associated with regulated bank deposits.