How US Banks Are Preparing for an Onchain Future

US banks are quietly transforming their operations to embrace the onchain future, focusing on tokenization of traditional financial products. This shift is largely directed at wholesale payments and settlement processes, under stringent regulatory frameworks. By leveraging public blockchains like Ethereum, these institutions are developing innovative financial services while maintaining adherence to existing regulations.

Key Takeaways

US banks are focusing on turning traditional financial products, like deposits and funds, into tokenized versions rather than creating entirely new crypto assets.
Most of the onchain activity in banks is happening behind the scenes in areas like wholesale payments and settlement.
Regulatory bodies are permitting crypto-related banking operations but only under strict supervision and risk management.
Major banks are testing public blockchains such as Ethereum through controlled product structures that comply with regulations.

US banks are strategically evolving rather than rushing to introduce speculative cryptocurrency products. Their efforts focus on modernizing core financial systems—such as payments, deposits, custody, and fund administration—to function on distributed ledger technologies. Though this progress may not be visible to everyday customers, it is significantly altering how large financial institutions approach money transfers and settlements.

Instead of sailing into the waters of unregulated crypto assets, banks are prioritizing the tokenization process. Tokenization involves converting traditional financial claims, like deposits or shares in funds, into digital tokens recorded on a blockchain. These tokens facilitate movement with built-in rules, automated settlement processes, real-time reconciliation, and minimized counterparty risks while still operating within current regulatory limits.

How US banks are quietly preparing for an onchain future

Tokenized Cash: The Rise of Deposit Tokens

One of the most apparent manifestations of this transition is the emergence of tokenized deposits, often referred to as “deposit tokens.” Unlike stablecoins from nonbank entities, these represent actual deposits from commercial banks, created and managed by regulated banks.

JPMorgan was among the first to make headway in this area. The bank introduced its JPM Coin for institutional clients, providing a deposit token that enables real-time, 24/7 blockchain-based transactions. According to JPMorgan, this system facilitates peer-to-peer payments and settlements between approved clients.

In 2024, JPMorgan rebranded its broader blockchain initiatives under the name Kinexys, positioning it as a platform focused on payments, tokenized assets, and programmable liquidity rather than portraying it as a classic “crypto” project.

Citi has also made significant advancements. In September 2023, they unveiled Citi Token Services, incorporating tokenized deposits and smart contracts into their institutional cash management and trade finance functions. By October 2024, Citi reported that its tokenized cash offering had progressed from piloting to full production, successfully processing large transactions for institutional clients.

These initiatives are not isolated efforts; they are part of a larger framework. The New York Fed's New York Innovation Center (NYIC) has shared plans for a regulated Liability Network (RLN) proof of concept, which includes banks like BNY Mellon, Citi, and others, as well as Mastercard. This project simulated interbank payments using tokenized bank deposits and a theoretical central bank digital currency (CBDC) in a controlled testing environment.

Did you know? Beyond cash and funds, numerous major US banks are also looking into the tokenization of real-world asset classes, such as private credit and commercial real estate. This move could enhance onchain liquidity and support fractional ownership, potentially positioning traditional finance ahead of standard crypto-native models.

Custody and Safekeeping: Establishing Strong Controls

For any onchain system to operate effectively, assets must be securely held and transferred, governed by strict custody standards. US banks have been diligently working to develop this crucial infrastructure.

In October 2022, BNY Mellon announced that its Digital Asset Custody platform was live in the US, permitting select institutional clients to hold and transfer Bitcoin.

Regulators have clarified permissible activities in this sector. The Office of the Comptroller of the Currency (OCC) asserted in Interpretive Letter 1170 that national banks can provide cryptocurrency custody services for their customers. Additionally, the US Federal Reserve published a paper in 2025 outlining expectations for crypto-asset safekeeping by banks regarding risk management and operational resilience.

While advancements are taking shape, caution remains prevalent. In January 2023, a joint statement from the Federal Reserve, Federal Deposit Insurance Corporation, and OCC urged banks to be aware of the risks tied to activities in the crypto sector.

Tokenized Funds and Collateral Shift to Public Blockchains

In addition to payments and custody, banks are actively exploring the tokenization of standard investment products.

In December 2025, J.P. Morgan Asset Management launched the My OnChain Net Yield Fund (MONY), its inaugural tokenized money market fund. The bank revealed that the fund's shares are issued as tokens on the public Ethereum blockchain and are powered by Kinexys Digital Assets.

Reportedly, JPMorgan initiated the fund with a $100 million investment, which they described as a private, tokenized version of a traditional money market fund, rather than just another crypto-related yield product.

This development is significant as it connects tokenized cash and tokenized yield-bearing instruments within familiar regulatory frameworks, showing that conventional asset managers are experimenting with public blockchains without discarding established compliance models.

Did you know? Several US banks and market participants are investigating how tokenization can help maintain traditional trading revenue by integrating digital asset trading and brokerage functionalities directly into banking systems. This strategy enables them to handle executions, spreads, and post-trade services in-house, even as tokenized markets expand.

Regulation: Allowed but Under Strict Supervision

The regulatory landscape is evolving alongside these initiatives. In March 2025, the OCC clarified that national banks could engage in various crypto-related activities, including custody and certain payment functions associated with stablecoins, rescinding previous guidance that required supervisory non-objection prior to proceeding.

The OCC has issued several interpretive letters to address related topics, such as banks holding deposits that back stablecoins and utilizing distributed ledger networks for payments. They have also provided examination guidelines that explain how supervisors will evaluate these activities.

Overall, these developments underscore a banking sector that is cautiously prepping for an onchain future by adapting existing products, embedding them within supervised environments, and testing new infrastructure long before these innovations reach widespread consumer use.