Banks Are Slowly Embracing Digital Money

Big banks in the U. S. are quietly working on digital versions of traditional financial products. They're not rushing into new crypto assets but are focusing on tokenizing things like deposits, funds, and custody. This shift is happening mostly behind the scenes, especially in wholesale payments and settlement. Tokenized deposits are a big part of this change. These are digital versions of bank deposits, not the stablecoins issued by non-bank entities. JPMorgan, for example, has its JPM Coin system, which allows real-time transfers on a blockchain. Citi has also jumped in with its tokenized cash service, moving millions for institutional clients. The New York Fed has been involved too, testing a system with several major banks. This system simulates interbank payments using tokenized deposits and a theoretical central bank digital currency (CBDC). Banks are also looking into tokenizing real-world assets like private credit and commercial real estate. This could make these assets more liquid and easier to own in fractions, giving traditional finance an edge over typical crypto models.Custody is another important aspect. BNY Mellon, for instance, has a digital asset custody platform that allows institutional clients to hold and transfer Bitcoin and Ether. Regulators have been clarifying what banks can and can't do with crypto assets, emphasizing caution but also allowing certain activities. Beyond payments and custody, banks are experimenting with tokenized funds. J. P. Morgan Asset Management launched a tokenized money market fund on the Ethereum blockchain. This fund is a private, tokenized version of a traditional money market fund, showing how asset managers are testing public blockchains while staying within regulatory structures. The regulatory environment is evolving too. The OCC has clarified that national banks can engage in certain crypto-related activities, like custody and stablecoin payments. These developments show that banks are preparing for a digital future in a cautious and supervised manner.