Tokenized Bank Deposits mark one year, set to reshape banking

Metro India News | Hyderabad 

Tokenized Bank Deposits (TBDs), a blockchain-based banking innovation considered capable of transforming global remittance and settlement systems, completed one year on May 22, 2026. The service was first launched by HSBC in Hong Kong on May 22, 2025, becoming the world’s first bank-led blockchain-based bank settlement service.

TBDs are regular fiat bank deposits converted into digital tokens by banks on blockchain networks. Banks lock customer deposit balances into tokens on a one-to-one basis, allowing customers to transfer funds instantly through blockchain technology without waiting for traditional banking approvals and settlement processes.

The system enables account holders to send funds at any time, similar to instant UPI transfers in India. Transactions are automatically recorded on digital ledgers maintained by banks, while token holders can convert the tokens back into regular money by surrendering or “burning” the tokens.

Initially, HSBC introduced the service in Hong Kong for Hong Kong Dollars and US Dollars within the HSBC banking network. The infrastructure was developed under Project Ensemble hosted by the Hong Kong Monetary Authority and operated on the regulated Canton blockchain network. The service has since expanded to Singapore, the United Kingdom, and Luxembourg, supporting currencies including HKD, USD, GBP, EUR, and SGD.

Currently, around seven major banks worldwide are offering TBD-related services. These include JPMorgan Chase, BNP Paribas, Citigroup, Deutsche Bank, Standard Chartered, and VersaBank. Several other international banks are conducting pilot projects for similar tokenized deposit systems.

Experts say TBDs are different from stablecoins and Central Bank Digital Currencies (CBDCs). Unlike stablecoins issued by private entities, TBDs remain liabilities of banks and continue to appear on bank balance sheets. They may also earn interest and qualify for deposit insurance. CBDCs, on the other hand, are digital currencies issued directly by central banks.

Banking analysts believe TBDs could significantly reduce remittance costs, eliminate delays in settlements, and improve cross-border fund transfers. Banks may also benefit by reducing operational costs and retaining deposits that could otherwise move toward cryptocurrencies and stablecoins.

At present, the volume of TBDs globally is estimated at below $5 billion. However, industry projections indicate annual transaction flows could surge to nearly $140 trillion by 2030 as multi-bank and multi-country transfer systems become operational.

-Dr. Kishore Nuthalapati is an Economist and a Corporate Finance Professional