US banks build a tokenized deposit network, shoring up defenses as stablecoins spread

Major US banks are jointly building a blockchain-based tokenized deposit network to respond to the spread of digital assets.

According to Bloomberg on the 18th (local time), Huntington Bancshares, First Horizon, M&T Bank, KeyCorp, and Old National Bancorp are developing tokenized deposit infrastructure with blockchain platform Kallina Network. Kallina Network is led by Eugene Ludwig, a former Comptroller of the Currency.

The core of the network is to represent existing bank deposits in the form of digital tokens. Tokenized deposits are based on ordinary deposits covered by Federal Deposit Insurance Corp. insurance and, unlike cryptocurrencies, are issued and managed within the banking system. Banks aim to speed up payments and fund transfers while preventing deposits from migrating to digital-asset platforms.

Eugene Ludwig, CEO of Kallina Network, said, "We plan to unveil a minimum viable product by the end of March, run a pilot program in the third quarter, and provide a full service to customers of participating banks in the fourth quarter." The five banks have been discussing the network’s formation since September last year and joined as initial design partners.

Banks see tokenized deposits as a practical way to respond to the proliferation of stablecoins. Since US President Donald Trump signed the Genius Act last year, a stablecoin regulatory framework, discussions across traditional finance have also been accelerating. Bank of New York Mellon also launched a tokenized deposit service earlier this year.

Zack Wasserman, Huntington’s chief financial officer (CFO), said, "If funds remain in deposits, banks can use them to make loans and fulfill their core role of supporting the economy." He underscored that maintaining a deposit base is central to banking.

Still, adopting digital-asset technology also brings regulatory risks such as money laundering. Participating banks therefore plan, in the initial stage, to limit the scope of fund movements to transactions among their own customers and to apply existing anti-money-laundering procedures in the same way.

Matt McCaffrey, head of digital assets at M&T, said, "Blockchain has the potential to strengthen financial infrastructure across payments and capital markets," adding that they are exploring a structure that enables always-on settlement in a regulated environment. Jim Ryan, chief executive officer (CEO) of Old National, also said, "Tokenized deposits are different from today’s cryptocurrencies," while noting that "real demand could emerge in terms of the speed and efficiency of moving funds."

Banks’ push to build their own network is largely defensive, reflecting the trend of digital-asset firms moving into the traditional finance arena. Attention is now on whether tokenized deposits can establish themselves as a midpoint between stablecoins and conventional deposits.