US Banks Prepare for Tokenization Tipping Point, Moody’s Ratings Says – Bitcoin News

Digital Currency Evolution: US Financial Institutions Consider 24/7 Tokenized Markets

Currently, activity is focused on stablecoins, tokenized deposits, and money market funds (MMFs). Most of this volume comes from cryptocurrency trading and specific institutional use cases. Moody’s notes that consumer and business demand for blockchain-based payments remains weak.

Many businesses continue to rely on traditional methods such as paper checks, viewing payment technology upgrades as a secondary priority to artificial intelligence (AI). Market participants believe that payments alone will not be enough to drive mass adoption. Instead, real value is expected to emerge when tokenized versions of traditional financial assets or agent commerce take off.

These use cases require on-chain settlement to enable instantaneous and programmable transactions. In this environment, US banks generally view tokenized deposits as a natural evolution of the existing deposit model.

The report notes that “conversations with major U.S. banks and financial market intermediaries, as well as a review of public disclosures, reveal a forming consensus that there will be a ‘slow, then fast’ transition to a more digitized financial system.” In contrast, many banks view privately issued stablecoins with suspicion. They see them as a potential threat from non-banking or technology companies that could circumvent traditional regulated frameworks and financing structures.

The transition to a fully digital, 24/7 financial market is expected to take place on a hybrid model for a decade or more. This allows traditional and tokenized systems to operate in parallel while systems are updated. Incumbents like the Depository Trust Company (DTC) are already moving toward integration. In late 2025, the SEC granted a no-action order to pilot the tokenization of certain DTC-held assets, including large-cap stocks.

On May 4, 2026, DTCC announced that it would facilitate limited production transactions of tokenized securities in July 2026. A full service launch is currently planned for October 2026. Major hurdles remain, including the need for clear legal ownership and settlement finality. Integrating distributed ledger technology into existing infrastructure requires a major restructuring of market processes.

Despite the challenges, Moody’s says tokenized money market funds are growing rapidly. These products currently have approximately $10 billion in assets outstanding, meeting a need for on-chain liquidity and yield. Insiders suggest that “once the key elements (legal and regulatory clarity, proven and integrated technology, and investor buy-in) are in place, adoption could move into much higher gear.”

Historical financial players are now investing massively to avoid being caught off guard when the market evolves.