BNY Mellon explores tokenized deposits to enable on-chain payments

• BNY Mellon is reportedly exploring the use of tokenized deposits for clients to make payments via blockchain.
• The initiative also aims to help banks overcome traditional constraints in moving funds across their networks.
• The move comes as financial institutions move to integrate blockchain infrastructure into their payment rails.

Bank of New York (BNY) Mellon is reportedly seeking to enable tokenized deposits for customers, allowing clients to make payments via blockchain networks.

BNY Mellon to allow clients make payments on-chain

BNY Mellon, one of the world's largest custodial banks overseeing $55.8 trillion in assets, is experimenting with tokenized deposits as part of its efforts to enhance its payment infrastructure, according to a report from Bloomberg on Tuesday.

The report, citing an interview with Carl Slabicki, executive platform owner for Treasury Services at the bank, noted that the initiative is part of a broader effort to modernize real-time, instant, and cross-border payments.

Tokenized deposits are digital tokens that represent a customer's claim to funds held at a commercial bank, essentially serving as digital equivalents of traditional bank deposits.

Slabicki explained that tokenized deposits could help banks overcome legacy technology barriers, enabling smoother movement of funds within their ecosystems and, over time, across the broader financial market as industry standards evolve.

The initiative will enable clients to make payments using blockchain networks, aligning with the growing trend of tokenization among financial institutions.

BNY Mellon's treasury services division currently processes about $2.5 trillion in payments daily, underscoring the potential scale of such an upgrade.

The firm also launched a joint initiative with Goldman Sachs in July, allowing its clients to invest in money market funds with records of ownership stored on the latter's blockchain solution.

The move comes as major financial institutions and global corporations are increasingly exploring ways to make payments faster and cost-efficient through blockchain networks.

In June, JPMorgan began testing JPMD, a token that represents dollar deposits running on the Layer 2 network Base, while HSBC Holdings recently introduced a tokenized deposit service that allows corporate clients to transfer money securely across borders.

SWIFT also announced last week that it is integrating a blockchain-based shared ledger into its network to support 24/7 cross-border payments, in partnership with crypto infrastructure provider Consensys and more than 30 financial institutions worldwide.