Tokenized Deposits Are No Longer Just for Big Banks

The Texas Bankers Association announced this month that it will give member banks structured access to tokenized deposit technology through its Innovation Magnet program, partnering with San Antonio-based Vantage Bank, one of the first Texas institutions to put tokenized deposits into live operation.

The move signals that the technology is now within reach for community and regional institutions. The program offers pilot slots, early-adopter pricing, and a compliant testing environment where member banks can explore real use cases without building from scratch.

TBA Vice President of Innovation Rich Perez framed the stakes plainly: Deposits are already moving from banks without on-chain capabilities toward those that offer them. “The real question for your members,” he said, “is participation: being part of this infrastructure shift, or watching competitors define it.”

By way of background, a tokenized deposit is simply a regular bank deposit, FDIC-insured, sitting on the bank’s balance sheet, represented as a digital token on a blockchain. No new money is created. What changes is how that money moves: instead of routing through legacy batch systems with fixed processing windows, tokenized deposits can settle instantly, around the clock, and can be programmed to execute automatically under defined conditions. Think of it as the same dollar, on faster, smarter rails.

They are distinct from stablecoins, which are issued outside the banking system by nonbank entities and operate under separate rules. Tokenized deposits carry deposit insurance and stay within the regulated banking perimeter.

The timing matters. PYMNTS reported last December that the FDIC has signaled a more open posture toward digital asset activity, with Acting Chairman Travis Hill telling Congress the agency is developing guidance to clarify the regulatory treatment of tokenized deposits. The passage of the GENIUS Act in July 2025 also established a federal framework for payment stablecoins, removing a layer of regulatory uncertainty that had kept many banks on the sidelines.

“Tokenized deposits replace the idea that instant money at scale globally needs a new issuer,” wrote PYMNTS CEO Karen Webster in one of her columns earlier this year.

The use cases already being tested at larger banks point to where the real value lies. According to KPMG, tokenized deposits are proving their worth in three core areas: conditional payments (using smart contracts to release funds automatically when conditions are met, such as in escrow or trade settlement); cross-border payments (eliminating intermediary hops and settlement delays for corporate transactions); and securities settlement (serving as the cash side of trades in tokenized assets like bonds or Treasurys).

HSBC has deployed tokenized deposits for corporate cross-border payments. JPMorgan has expanded its deposit token program for institutional settlement. Five regional banks — KeyBank, Huntington, First Horizon, M&T, and Old National — have formed a consortium called the Cari Network, with a full rollout planned for later this year.

For community banks, the practical pitch is about defense as much as offense. The American Bankers Association noted recently that as tokenized asset markets grow there will be growing demand for a regulated, insured form of digital money to serve as the cash leg in those trades. Banks that can provide that are well-positioned; those that cannot find their business customers moving deposits to institutions that do.

The road ahead still has friction. Banking Exchange has noted that true interbank tokenized deposit settlement, where tokens move freely between institutions on a shared ledger, does not yet exist at production scale in the U.S. Every interbank transfer still requires reserve settlement, just as traditional deposits do. And the Conference of State Bank Supervisors has urged federal agencies to issue coordinated guidance before banks commit significant capital to the technology.

What the TBA program represents, then, is a pragmatic middle path: a structured way for smaller institutions to learn, test, and position themselves without waiting for a perfect regulatory framework that may still be months away. The deposits are already moving. The question, as Perez put it, is who defines where they land.