BNY Moves Toward Tokenised Deposits For Big Investors

(MENAFN- The Arabian Post)

Bank of New York Mellon has outlined plans to offer tokenised deposit accounts to institutional clients, marking a significant step by the world's largest custodial bank into blockchain-based settlement infrastructure. The initiative is designed to mirror traditional deposit balances on a private blockchain, allowing large investors to move cash and securities with greater speed while remaining within the perimeter of regulated banking.

BNY said the proposed structure will represent deposits held at the bank as digital tokens recorded on a permissioned ledger. Each token would correspond one-for-one with a cash balance on BNY's balance sheet, preserving the legal and prudential characteristics of a standard bank deposit while enabling near-instant settlement between approved participants. The bank indicated that the service is aimed at asset managers, broker-dealers, and other large financial institutions that already rely on BNY for custody, clearing, and collateral management.

Senior executives have framed the move as an extension of existing deposit and payment services rather than a shift toward unregulated digital assets. By using a private blockchain operated within the bank's control environment, BNY intends to avoid the volatility and legal uncertainty associated with cryptocurrencies while capturing efficiencies associated with distributed ledger technology. The tokens would not circulate on public networks and would be redeemable at par into conventional cash at all times.

The project reflects a broader push among global banks to modernise settlement rails that still rely heavily on batch processing and cut-off times. Institutional trading across equities, fixed income, and derivatives often requires the movement of cash between custodians and counterparties, a process that can take hours or days and tie up liquidity. By allowing deposits to be transferred and pledged on a blockchain around the clock, banks hope to reduce counterparty risk and free capital that would otherwise sit idle.

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BNY has spent several years positioning itself at the centre of digital-asset plumbing for traditional finance. It already provides custody for selected cryptocurrencies and tokenised securities, and it has built internal blockchain platforms to support collateral and fund-servicing workflows. Executives have said the deposit token initiative builds on this infrastructure and leverages the bank's scale, which includes trillions of dollars in assets under custody and administration.

The move places BNY alongside a small but growing group of large lenders experimenting with tokenised bank money. JPMorgan Chase has developed JPM Coin, used by corporate clients to move funds internally, while several European banks have launched similar instruments for wholesale payments. Unlike stablecoins issued by non-banks, these products represent direct claims on regulated institutions and are treated as deposits for accounting and regulatory purposes.

Regulatory acceptance remains central to the strategy. Tokenised deposits sit at the intersection of payments law, banking supervision, and emerging digital-asset rules. In the United States, supervisors have emphasised that any blockchain-based deposit product must comply with capital, liquidity, and consumer-protection requirements. BNY has said it is working closely with regulators to ensure the design meets existing standards and does not create new risks.

Market participants say the appeal of such products lies less in novelty than in operational efficiency. Large asset managers increasingly hold tokenised versions of bonds, funds, and other instruments on distributed ledgers. Being able to settle those assets with tokenised cash issued by a major custodian could streamline post-trade processes and reduce reliance on intraday credit. It could also support more complex uses such as atomic settlement, where delivery of securities and payment occur simultaneously.

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The initiative also speaks to competitive dynamics among custodians and clearing banks. As clients demand faster settlement and real-time reporting, incumbents face pressure from fintech firms offering blockchain-native services. By embedding tokenisation within its existing platform, BNY is attempting to defend its role while setting standards that favour regulated institutions over start-ups.

Arabian Post – Crypto News Network

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