BNY Mellon Explores Tokenized Deposits to Modernize Payments

Executive Summary

BNY Mellon, the world's largest custodian by assets under custody, is actively exploring the implementation of tokenized deposits to facilitate blockchain-based payment systems. This strategic initiative targets the inherent inefficiencies within existing legacy payment infrastructures, aligning with a wider industry trend towards real-time, 24/7 settlement capabilities. The move reflects a modernization push in a financial ecosystem where the bank's treasury services unit processes an average of $2.5 trillion in payments daily and oversees $55.8 trillion in assets under custody and/or administration.

The Event in Detail

BNY Mellon's treasury services unit is assessing tokenized deposits, defined as bank-issued, transferable digital coins representing a claim on commercial bank money. These deposits are designed to enable clients to execute payments over blockchain rails, facilitating near-instant and continuous 24/7 settlement, a significant departure from conventional correspondent networks. Carl Slabicki, executive platform owner for Treasury Services at BNY Mellon, indicated that this endeavor is part of a broader push towards modernizing real-time, instant, and cross-border payments. The bank's engagement in digital asset infrastructure also includes a July partnership with Goldman Sachs to maintain tokenized records of money market fund ownership, aiming to enhance collateral mobility and settlement.

Market Implications

The exploration by BNY Mellon signifies a growing institutional embrace of blockchain technology within traditional finance. This development parallels initiatives by other major global banks; for instance, JPMorgan launched a proof-of-concept for JPMD, a USD deposit token running on Base, and HSBC rolled out a tokenized deposit service for corporate clients to facilitate cross-border currency transactions. Messaging network Swift is also developing a blockchain-based shared ledger prototype for cross-border payments. In collaboration with Chainlink and UBS, Swift has successfully piloted the integration of blockchain transactions using ISO 20022 messages, allowing banks to access blockchains without requiring infrastructure overhauls. This shift towards tokenized deposits is seen as a mechanism to overcome "legacy technology constraints" within banking ecosystems, with the potential to extend across the broader market as standards mature.

Expert Commentary

Industry analysis suggests that the adoption of tokenized deposits by banks could lead to a more robust financial system, particularly as stablecoins gain traction and regulatory clarity. Caroline Butler, Global Head of Digital Assets at BNY Mellon, advocates for a comprehensive regulatory rethinking of digital assets to maximize the transformative potential of blockchain and smart contracts beyond incremental optimizations. The GENIUS Act, signed in July 2025, establishes a federal framework for "payment stablecoins," requiring backed reserves and stricter oversight, which is expected to lower risks and boost opportunities. A recent EY-Parthenon survey indicated that 54% of financial institutions not currently using stablecoins plan to adopt them within six to twelve months, driven by potential cost savings and faster processing. Nearly half (49%) of surveyed institutions are already utilizing stablecoins for payments, according to Fireblocks' 2025 report.

Broader Context

The move by BNY Mellon contributes to the blurring lines between traditional finance (TradFi) and decentralized finance (DeFi), setting a precedent for wider institutional integration. This trend suggests a fundamental reshaping of global payment infrastructure, potentially improving cross-border settlements and driving demand for underlying blockchain infrastructure. The total market value of stablecoins reached a peak of $294 billion by September 2025, buoyed by regulatory clarity and increased institutional acceptance. While banks are actively participating in this transformation, the prospect of deposits shifting to yield-bearing stablecoins could impact bank funding and potentially raise borrowing costs for governments and households, as noted by the Bank for International Settlements. Compliance challenges, particularly anti-money laundering scrutiny, are also intensifying with each blockchain transaction, necessitating a careful regulatory approach as these digital innovations become part of the global financial infrastructure.