How US banks are quietly preparing for a blockchain future

Key takeaways

• US banks are prioritizing tokenized versions of familiar products, including deposits, funds and custody, rather than launching new crypto-native assets.

• Most blockchain banking activities take place in the areas of wholesale payments, settlement and infrastructure, largely out of the public eye.

• Regulators are increasingly allowing crypto-related banking activities, but only within closely supervised and risk-managed frameworks.

• Public blockchains such as Ethereum are being tested by major banks, but exclusively through controlled and compliant product structures.

US banks are not rushing to issue speculative crypto products. Instead, they are methodically rebuilding core financial systems, including payments, deposits, custody, and funds administration, so that these services can operate on distributed ledgers. This work is incremental, technical and often invisible to retail clients, but it is already reshaping the way large institutions think about the movement and settlement of money.

Rather than adopting unregulated crypto assets, banks are focusing on tokenization, the process of representing traditional financial claims, such as deposits or fund shares, as digital tokens recorded on a ledger. These tokens are designed to scale with built-in rules, automated settlement, real-time reconciliation and reduced counterparty risk while remaining within existing regulatory frameworks.

Tokenized cash: deposits that evolve like software

One of the clearest signals of this shift is the rise of tokenized deposits, sometimes described as “deposit tokens.” These are not stable coins issued by banks. Rather, they are digital representations of commercial bank deposits issued and repaid by regulated banks.

JPMorgan was among the first to move. Its JPM Coin system, launched for institutional clients, is positioned as a custodial token that enables 24/7 real-time transfers on blockchain-based rails. According to JPMorgan, the system is used for peer-to-peer payments and settlements between approved customers.

In 2024, JPMorgan rebranded its broader blockchain unit Kinexys, presenting it as a platform for payments, tokenized assets and programmable liquidity rather than a standalone “crypto” initiative.

Citi has taken a similar path. In September 2023, the bank announced Citi Token Services, integrating tokenized deposits and smart contracts into its institutional treasury management and trade finance offerings. In October 2024, Citi said its tokenized cash payment service had moved from pilot stage to real production, processing multi-million dollar transactions for institutional clients.

These initiatives do not occur in isolation. The New York Fed’s New York Innovation Center (NYIC) has released details of a proof of concept for a Regulated Liability Network (RLN) involving banks including BNY Mellon, Citi, HSBC, PNC, TD Bank, Truist, US Bank and Wells Fargo, as well as Mastercard.

The project simulated interbank payments using tokenized commercial bank deposits as well as a theoretical representation of central bank digital currency (CBDC), all in a controlled testing environment.

Did you know? Beyond cash and funds, major US banks are actively considering tokenization of real-world asset classes such as private credit and commercial real estate. This could unlock on-chain liquidity and fractional ownership, an area where traditional finance can gain an edge over typical crypto-native models.

Custody and conservation: establishment of institutional level controls

For an on-chain system to operate at scale, assets must be held and transferred under strict custody and governance standards. American banks have continued to build this layer.

BNY Mellon announced in October 2022 that its digital asset custody platform was operational in the United States, allowing certain institutional clients to hold and transfer Bitcoin (BTC) and Ether (ETH). The bank has positioned the service as an extension of its traditional custody role, tailored to digital assets.

Regulators have clarified what is allowed. The Office of the Comptroller of the Currency (OCC), in Interpretive Letter 1170, stated that national banks can provide cryptocurrency custody services to their customers. The US Federal Reserve also weighed in, releasing a 2025 document on the custody of cryptoassets by banking organizations, which outlines expectations for risk management, internal controls and operational resilience.

At the same time, regulators have emphasized caution. In January 2023, the Federal Reserve, the Federal Deposit Insurance Corporation, and the OCC issued a joint statement warning banks of the risks associated with doing business in cryptoassets and dealing with companies in the crypto industry.

Tokenized funds and collateral are transferred to public blockchains

Beyond payments and custody, banks are also experimenting with tokenization of traditional investment products.

In December 2025, JP Morgan Asset Management announced the launch of My OnChain Net Yield Fund (MONY), its first tokenized money market fund. The company said the fund’s shares are issued as tokens on the public Ethereum blockchain and the product is powered by Kinexys Digital Assets.

Reportedly, JPMorgan injected $100 million into the fund and described it as a private, tokenized representation of a traditional money market fund rather than a crypto-native yield product.

This step is important because it connects tokenized cash and yield-generating tokenized instruments within familiar regulatory structures, illustrating how traditional asset managers are testing public blockchains without abandoning established compliance models.

Did you know? Some US banks and market participants are exploring the role of tokenization in preserving traditional trading revenues by integrating digital asset trading and brokerage infrastructure directly into banking systems. This approach allows them to keep execution, spreads and post-trade services in-house, even as tokenized markets grow.

Regulation: permitted, but closely monitored

The regulatory environment has evolved alongside these pilot projects. In March 2025, the OCC clarified that domestic banks could engage in certain crypto-related activities, including custody and certain stablecoin and payment functions, and reversed previous guidance that required banks to seek the supervisor’s no-objection notice before proceeding.

The OCC also issued a series of interpretive letters addressing related issues, including banks holding deposits backed by stablecoins (IL 1172) and using distributed ledger networks and stablecoins for payments (IL 1174), as well as examination guidance explaining how supervisors will examine these activities.

Taken together, these developments show a banking industry cautiously preparing for a blockchain future by adapting existing products, integrating them into supervised environments, and testing new infrastructure well before they become widespread.