Wall Street Banks Develop Tokenized Deposits for Faster Cross-Border Payments

Tokenized deposits are being developed by Wall Street banks to make cross-border payments faster and more efficient. DBS and Citi's New York office successfully completed a dollar payment between Singapore and the US in minutes, using tokenized deposits through SWIFT's digital ledger.

This technology allows companies to move money across borders quickly, even on weekends, reducing the need for prefunding and minimizing the cost of carrying extra cash. Prefunding involves moving money into an account two days early to ensure a payment goes through, which can be costly, especially when borrowing at high interest rates.

Banks are investing in tokenized deposits because they offer a lucrative opportunity to reduce fees from companies that currently pay them for converting currencies and arranging loans. In addition, the banks are also working on stablecoin businesses, partnering with 21 financial institutions to establish a dollar offering by the first half of 2027.

The use of tokenized deposits and stablecoins has several advantages over traditional payment systems. They can settle obligations between banks in central bank money, supporting transfers at face value, and they can also provide instant payments that require more cash at a particular moment than offsetting obligations.