Key takeaways
US banks are focusing on tokenized forms of established products like deposits, funds, and custody, rather than creating new crypto-native assets.
Most bank activity on the blockchain is happening in wholesale payments, settlement, and infrastructure, mainly out of the public eye.
Regulators are slowly permitting crypto-related banking activities, but only within heavily monitored and risk-managed frameworks.
Major banks are testing public blockchains such as Ethereum, but only through regulated and compliant product structures.
US banks are not hurrying to create speculative crypto products; instead, they are methodically upgrading essential financial systems including payments, deposits, custody, and fund management to work on distributed ledgers. This incremental, technical work is largely unnoticed by retail customers, but it is already altering how large institutions view money movement and settlement.
Rather than adopting unregulated crypto assets, banks are concentrating on tokenization, the process of digitizing traditional financial claims, such as deposits or fund shares, into digital tokens recorded on a ledger. These tokens are designed to operate with embedded rules, automated settlements, real-time reconciliations, and reduced counterparty risks while adhering to existing regulatory frameworks.
Tokenized cash: Deposits that move like software
A prominent indication of this shift is the emergence of tokenized deposits, often referred to as “deposit tokens.” Unlike stablecoins issued by nonbanks, these are digital representations of commercial bank deposits issued and redeemed by regulated banks.
JPMorgan is one of the first movers, with its JPM Coin system, launched for institutional clients, serving as a deposit token that allows real-time, 24/7 transfers on blockchain-based platforms. According to JPMorgan, this system is used for peer-to-peer payments and settlements between approved clients.
In 2024, JPMorgan rebranded its broader blockchain unit as Kinexys, presenting it as a platform for payments, tokenized assets, and programmable liquidity instead of a standalone “crypto” initiative.
Citi has taken a similar route. In September 2023, the bank announced Citi Token Services, incorporating tokenized deposits and smart contracts into its institutional cash management and trade finance offerings. By October 2024, Citi stated that its tokenized cash service had moved from pilot to live production, processing multimillion-dollar transactions for institutional clients.
These initiatives are not occurring in isolation. The New York Fed’s New York Innovation Center (NYIC) has published details of a regulated Liability Network (RLN) proof of concept involving banks such as BNY Mellon, Citi, HSBC, PNC, TD Bank, Truist, U.S. Bank, and Wells Fargo, alongside Mastercard.
The project simulated interbank payments using tokenized commercial bank deposits along with a hypothetical wholesale central bank digital currency (CBDC) representation, all within a regulated test environment.
Did you know? Beyond cash and funds, leading US banks are actively evaluating the tokenization of real-world asset classes like private credit and commercial real estate, potentially unlocking on-chain liquidity and fractional ownership, an area where traditional finance could outperform typical crypto-native models.
Custody and safekeeping: Building institutional-grade controls
For any on-chain system to function at scale, assets must be managed and transferred with stringent custody and governance standards. US banks have been gradually establishing this layer.
BNY Mellon announced in October 2022 that its Digital Asset Custody platform was operational in the US, allowing select institutional clients to hold and transfer Bitcoin (BTC) and Ether (ETH). The bank described the service as an extension of its traditional safekeeping role, updated for digital assets.
Regulators are clarifying what is allowed. The Office of the Comptroller of the Currency (OCC), in Interpretive Letter 1170, stated that national banks are permitted to provide cryptocurrency custody services for customers. The US Federal Reserve has chimed in as well, publishing a 2025 paper on crypto-asset safekeeping by banking organizations, outlining expectations concerning risk management, internal controls, and operational resilience.
Simultaneously, regulators have stressed the need for caution. In January 2023, the Federal Reserve, Federal Deposit Insurance Corporation, and OCC issued a joint statement alerting banks to risks tied to crypto-asset activities and relationships with crypto-sector firms.
Tokenized funds and collateral move onto public blockchains
In addition to payments and custody, banks are experimenting with the tokenization of traditional investment products.
In December 2025, J.P. Morgan Asset Management announced the creation of the My OnChain Net Yield Fund (MONY), its inaugural tokenized money market fund. The firm stated that the fund’s shares are issued as tokens on the public Ethereum blockchain and powered by Kinexys Digital Assets.
Reportedly, JPMorgan initiated the fund with $100 million and characterized it as a private, tokenized version of a traditional money market fund, not a crypto-native yield product.
This development is important as it connects tokenized cash and yield-bearing instruments in familiar regulatory frameworks, demonstrating how traditional asset managers are exploring public blockchains without abandoning established compliance models.
Did you know? Several US banks and market participants are looking into tokenization’s potential for retaining traditional trading revenues by integrating digital asset trading and brokerage infrastructure directly into their systems, allowing them to maintain execution, spreads, and post-trade services internally as tokenized markets develop.
Regulation: Permitted, but closely supervised
The regulatory landscape has been adapting alongside these pilot projects. In March 2025, the OCC clarified that national banks may engage in specific crypto-related activities, including custody and certain stablecoin and payment operations, rescinding earlier guidance that required banks to seek supervisory non-objection prior to proceeding.
The OCC has also published a series of interpretive letters addressing associated issues, including banks holding deposits that back stablecoins (IL 1172) and utilizing distributed ledger networks and stablecoins for payments (IL 1174), along with examination guidance on how supervisors will review these activities.
Collectively, these developments illustrate a banking sector cautiously preparing for an on-chain future by adapting existing products, embedding them within supervised environments, and testing new infrastructures well before they become mainstream.
