Tokenized deposits vs Stablecoins in Canton

With HSBC, Lloyds and JPMorgan all committing to token deposits on the Canton Network, Bernhard Elsner, Director of Digital Asset Products, explains why the instrument is structurally distinct from stablecoins and how Canton’s architecture eliminates bridging risk rather than simply managing it.

The tokenized deposit market is accelerating. HSBC has carried out a pilot project simulating the issuance and atomic settlement of its tokenized deposit service on the Canton network. Lloyds Bank issued token sterling deposits on Canton and used them to purchase a token gilt from Archax. JPMorgan’s Kinexys unit is natively bringing JPM Coin to Canton in a phased integration throughout 2026. Behind the three deals is Digital Asset, the creator of the Canton network, which, as crypto.news reported, positions the network as the only Layer 1 public blockchain purpose-built for institutional finance, combining configurable privacy, atomic composability, and regulatory compliance in a single layer of infrastructure.

Deployments of tokenized depository canton networks raise a fundamental question: what makes them different from stablecoins?

Bernhard Elsner, chief product officer at Digital Asset, told crypto.news that the distinction is fundamental and determines everything else about the instrument’s behavior. “Tokenized deposits are a digital representation of a commercial bank deposit on a blockchain or other DLT platform. Unlike many other digital assets, these tokens represent the bank’s own liability to the holder, having the same legal status as a pound or dollar placed in a traditional deposit account,” Elsner said. In contrast, a stablecoin holder is a creditor of a private issuer using a pool of reserve assets. A wrapped asset holder relies on the integrity of a wrapping contract as well as any custodial arrangement that underlies it. A tokenized deposit holder is a depositor, with capital requirements, prudential oversight, KYC and AML inherited from the bank and, in most jurisdictions, deposit insurance. “For institutional cash management, it’s the difference between an instrument that you can park working capital in and one that you can only route through,” Elsner said. DTCC has already chosen Canton to tokenize U.S. Treasuries, which Elsner describes as transforming tokenized deposits into a natural cash leg that allows for true atomic delivery versus payment between regulated assets and regulated bank money.

Tokenized deposits and Stablecoins are complementary and not competitive

The distinction between the two instruments does not mean that they are adversaries. Elsner is blunt on this point: stablecoins optimize reach and liquidity, while tokenized deposits optimize balance sheet integrity and regulatory certainty. “Even though these assets require different tradeoffs, it is important to remember that they are complementary to each other,” he said. “We expect tokenized deposits to be leveraged alongside stablecoins and other digital assets as institutions determine which instrument fits which workflow.” Canton privacy and native composability are what make this coexistence possible at the infrastructure level. In Guangzhou, a token deposit functions as a direct, regulated bank liability, meaning it is not a wrapped debt, IOU, or separate bearer instrument. It never leaves the legal and operational framework in which it was issued. This is what gives institutions the confidence to use it for working capital rather than just routing. As crypto.news followed, JPMorgan’s Naveen Mallela described deposit tokens as a “convenient and cost-effective alternative” for institutions that want speed and security without leaving the banking system, a characterization that fits precisely what Elsner describes as the instrument’s institutional value proposition.

How Canton Eliminates Bridge Risk Rather Than Managing It

It is in the question of interoperability that the Canton architecture demonstrates its greatest commercial importance. Elsner sees the lack of interoperability not as a technical disadvantage but as a structural obstacle on a significant scale. “Interoperability is absolutely critical to institutional adoption, otherwise these assets will remain trapped in fragmented silos and unable to achieve meaningful scale,” he said. “An asset that cannot grow beyond its native platform cannot be financed, reused, or integrated into broader financial workflows. » According to Elsner, most current DvP implementations do not achieve true atomicity because settlement typically relies on intermediaries, pre-funding, or sequential processes between systems, which introduces latency and residual risk. On Canton, the securities part and the cash part can be settled in a single atomic transaction on two different applications without a bridge between the two. “Settlement risk is not managed. It is eliminated at the infrastructure level,” Elsner said. HSBC’s pilot demonstrated exactly that, simulating the atomic settlement of token deposits against other digital assets without the token leaving its institutional framework of issuance. As crypto.news has documented, Canton processes over $350 billion in tokenized value daily in 2026, with DTCC, LSEG’s Digital Settlement House, and now JPMorgan all choosing it as their primary settlement infrastructure.

Elsner said he expects token deposits and stablecoins to continue to grow in parallel as different institutional workflows determine which instrument compromises are best suited.