Banks Build Tokenized Deposits to Speed Up Cross-Border Payments

Banks are working on tokenized deposits to make international payments easier and faster. DBS and Citi's New York office recently completed a dollar payment between Singapore and the US in minutes, using SWIFT's digital ledger. This service could be lucrative for banks as companies pay them to convert currencies and arrange loans.

Currently, businesses often move money early or keep extra cash in accounts where they might need it. However, this ties up money that could be used elsewhere. Banks want to make transfers easier by using tokenized deposits, which record bank deposits as digital tokens. This way, companies can move their money across borders when needed, including on weekends.

The banks are also working on reserve-backed stablecoins, which work differently. Their issuers hold assets intended to support the tokens' value and redemption. Dollar tokens can then move between users on supported networks while the backing assets are held elsewhere. Both tokenized deposits and stablecoins look like dollars moving through an app but have key differences.

The establishment of a new company by 21 institutions sets out a planned dollar offering in the first half of 2027, with other G7 currencies being a longer-term ambition. The announcement doesn't disclose how members would divide future income. Citi is involved in both the tokenized-deposit payment and the separate stablecoin group.