Wall Street Develops Tokenized Deposits to Accelerate Cross‑Border Payments

DBS Bank and Citi’s New York office completed a dollar payment between Singapore and the United States in minutes on September 5, using tokenized deposits recorded on SWIFT’s digital ledger. The pilots illustrate how banks aim to offer faster, on‑demand cross‑border settlement for corporate customers.

Why Faster Settlement Matters

Traditional international transfers often require multiple banks to coordinate, causing delays that force companies to pre‑fund accounts or borrow short‑term. A hypothetical $10 million pre‑funded payment for two days at a 5 % annual borrowing rate would cost roughly $2,740 in interest, illustrating the hidden expense of cash‑locking.

Tokenized Deposits vs. Stablecoins

Tokenized deposits keep the underlying relationship with the issuing bank, while reserve‑backed stablecoins rely on a separate issuer’s reserve assets. Both appear as dollar‑denominated tokens to the end user, but the source of the obligation differs:

• Ordinary bank deposit: Obligation lies with the account‑holding bank; usable through the bank’s supported payment services.
• Tokenized bank deposit: Obligation remains with the bank under the deposit terms, but the token can be transferred within participating networks.
• Reserve‑backed stablecoin: Obligation rests with the token issuer; usable through compatible wallets and services.

Industry Momentum

Twenty‑one financial institutions announced a joint stablecoin venture targeting a dollar‑backed token launch in the first half of 2027, with plans to expand to other G7 currencies later. Citi participates in both the tokenized‑deposit pilot and the stablecoin consortium, reflecting banks’ dual strategy to retain customers across different digital‑money formats.

Challenges and Competition

Existing systems such as the European Central Bank’s TIPS service already provide near‑real‑time settlement for certain currencies. New token‑based solutions must compete on coverage, cost, and reliability, especially when the recipient’s bank cannot directly accept the token. In such cases, additional intermediaries or conversion steps may be required, potentially eroding the speed advantage.

Potential Benefits for Corporates

If widely adopted, tokenized deposits could reduce the need for pre‑funding, lower borrowing costs, and enable payments on weekends or holidays. The key to adoption will be transparent pricing, seamless integration with existing banking relationships, and dependable support when transfers encounter issues.