Why Wall Street giants build tokenization money for institutions, not regular consumers

JPMorgan moves more than $3 trillion through its Kinexys blockchain platform, and Citi Token Services processes billions in cross-border payments daily. Both are great examples of Wall Street giants modernizing their legacy systems and adopting blockchain for cross-border payments; however, neither of them is for the regular person with a savings account.

That gap is not an accident. "Most of the coins that have been minted and are being used for money transfer are all internal projects," said Mintoo Bhandari, founder of Monument Bank, a U.K. challenger bank with a roughly $2.4 billion balance sheet.

“Is that really moving the needle for the whole bank and for the consumer? Not yet."

That is the central divide in the tokenized-money debate. Banks are putting tokenized deposits and payments on blockchain infrastructure, but most projects remain restricted to institutional customers or permissioned networks. Monument and privacy-focused blockchain Midnight are betting that regulated, interest-bearing bank deposits can eventually give retail clients access to tokenized investments and lending without requiring them to understand crypto.

Legacy infrastructure

"99% of the banks in the world are like, 'Yeah, we're really digital, we have an app!'," Bhandari said. "But the reality is they're struggling with legacy architectures that go back to the 1970s that they cannot leap."

Treasury desks at major institutions are juggling three systems for the same job, said Jerald David, CEO of Lynq Network. A JPMorgan tokenized deposit for one client, a regulated stablecoin for another, a conventional correspondent account for a third. They move money on for the same reasons, but on different infrastructure.

"What clients can't afford are separate pools of liquidity locked up on every network they access, because idle liquidity fragmented across five networks is five times the capital inefficiency of idle liquidity sitting in one place," he said.

Unlike a stablecoin, a tokenized deposit remains a claim on the bank that issued it. It can bear interest, remain within the regulated banking system and potentially be programmed to settle against tokenized assets. The question is whether banks can deliver those benefits to consumers while maintaining privacy, compliance and control over who holds the deposit.

Interest-bearing deposits

Bhandari said Monument, unlike stablecoin issuers, holds a banking licence that allows it to pay interest on deposits and plans to offer tokenized savings accounts that earn yield.

President of the Midnight Foundation Fahmi Syed said public blockchain infrastructure presents a separate challenge: banks cannot expose clients’ transaction data and commercial relationships.

"Once you create a private blockchain, how do you then speak to another private blockchain? You then have to use a bridge or some other mechanism, and at that point, you have data leakage." JPMorgan and Citibank have recognized this themselves, Syed said.