Large banks launch new blockchain payment tools, challenging the traditional stablecoin landscape

Recently, a well-known bank announced it will pilot a new payment tool called "deposit token," deployed on a public Blockchain. It is expected that in the coming days, the bank will transfer a certain amount of deposit tokens from its digital wallet to a large cryptocurrency exchange.

In the initial stage, this token is limited to institutional clients of the bank, and in the future, it will gradually expand to a broader user base and more coins after approval from regulatory authorities.

The deposit token will be trialed for several months and may have interest-bearing features.

This initiative is not a spur-of-the-moment decision. As early as last year, the bank had begun researching the feasibility of deposit tokens in its Blockchain department. Just before the pilot news was announced, it was discovered that the bank had applied for relevant trademarks covering functions such as cryptocurrency trading, payment, and custody. At that time, the market speculated that this could be a signal for the bank's entry into the stablecoin market.

However, the bank ultimately chose to issue deposit tokens instead of stablecoins, emphasizing that this is a more robust and regulated alternative.

The global co-head of the bank's Blockchain division stated in a media interview that this token will be priced in dollars, may have interest-bearing capabilities in the future, and could be included in deposit insurance, features that are currently not available in mainstream stablecoins.

He added: "From an institutional perspective, deposit tokens are superior to stablecoins. Because they are based on a fractional reserve banking system, we believe they are more scalable."

This pilot also marks that the bank is expanding the use of digital asset products beyond its internal systems. The bank has been at the forefront of promoting Blockchain technology applications and currently operates a network that allows corporate clients to transfer US dollars, euros, and British pounds. According to reports, the trading volume of this network increased tenfold last year and currently processes over $2 billion in transactions daily on average.

Although the deposit token is designed to operate on a public Blockchain, it will still be a permissioned token intended solely for the institutional clients of the bank.

The Difference Between Deposit Tokens and Stablecoins

In a white paper published a few years ago, the bank detailed the concept of deposit tokens and their differences from stablecoins. Deposit tokens refer to transferable tokens issued on the blockchain by licensed deposit-taking institutions, representing the holder's claim to deposits with the issuing institution. They naturally belong to the banking system and are subject to the regulations and oversight currently applicable to commercial banks.

Deposit tokens can support a variety of application scenarios, including domestic and international payments, trading and settlement, and the provision of cash collateral. Their token form can also enable new functionalities, such as programmability, instant and atomic settlement, thereby accelerating transaction speeds and automatically executing complex payment operations.

In contrast, stablecoins are tokens pegged to fiat currencies, typically backed by a basket of securities (such as government bonds or other highly liquid assets) at a 1:1 ratio. Although stablecoins have driven the development of the digital asset ecosystem in recent years, they may pose challenges to financial stability, monetary policy, and credit intermediation when used at scale.

Regulatory Environment Changes

Recently, the U.S. Senate passed a stablecoin regulatory bill aimed at establishing a regulatory framework for stablecoins and digital assets. The bill requires one-to-one reserves, consumer protection, and anti-money laundering mechanisms. This initiative could further promote the adoption of stablecoins.

At the same time, some financial experts believe that Europe may fall behind the United States and Asia in the field of digital assets. At a conference held in London, an executive from an asset management company stated that the EU could become a "region that is being overtaken," while the United States and Asia are accelerating their embrace of the development of digital assets.

Future Outlook

The launch of deposit tokens by large banks is not only an important milestone in their Blockchain strategy but also reflects that traditional financial institutions are accelerating their exploration of the future form of on-chain payments. Currently, several multinational banks and technology companies are also trying to utilize Blockchain technology to achieve more efficient and low-cost payment settlement services.

In the process of blockchain technology becoming mainstream in the financial system, deposit tokens issued by commercial banks, protected by a regulated framework, and connected to the existing account system, may become the new standard for "on-chain cash" in this new phase. The development in this area will continue to attract market attention.