BNY Mellon Launches Tokenized Deposit Pilot for 24/7 Institutional Settlement

Introduction

BNY Mellon has launched a tokenized deposits pilot that mirrors institutional clients’ demand-deposit balances on-chain, positioning the bank in the growing race for on-chain cash and blockchain-based settlement. The service creates digital book entries on BNY’s Digital Assets platform so clients can move funds using blockchain infrastructure while keeping money inside the regulated banking system—aimed at faster, 24/7 settlement and programmable transactions.

These BNY tokenized deposits are mirrored on-chain but still recorded on BNY’s traditional systems for regulatory, accounting, and reporting continuity, running on a private, permissioned blockchain under existing risk and compliance controls. Initial use cases focus on collateral and margin workflows, with early participants including Intercontinental Exchange (ICE), Citadel Securities, DRW Holdings, Baillie Gifford, Circle, and Ripple Prime, underscoring accelerating institutional adoption of tokenization in capital markets.

Momentum is also building around broader tokenization and real-world asset (RWA) tokenization, as banks and infrastructure providers explore putting traditional instruments onto digital rails. Alongside this push, BNY’s expanding digital-asset strategy includes progress toward crypto custody for Bitcoin and Ether exchange-traded product clients, with regulatory considerations shaped by SEC accounting guidance like SAB 121. Parallel developments—such as tokenized gold products and forecasts that tokenized RWAs could scale dramatically by 2030—highlight why programmable, always-on financial infrastructure is becoming a key theme across TradFi and Web3.

Background

BNY Mellon has introduced a tokenized deposits capability designed for institutional clients who want on‑chain cash movement without stepping outside the regulated banking perimeter. The initiative enables an on‑chain mirrored representation of client deposit balances on BNY’s Digital Assets platform, initially targeting collateral and margin workflows—areas where speed, certainty, and operational efficiency matter most in modern market plumbing. The move positions BNY alongside a growing set of large financial institutions building “always‑on” infrastructure for real-time settlement, programmable payments, and tighter liquidity management.

What “tokenized deposits” means (and what it doesn’t)

A tokenized deposit is best understood as a digital representation of a bank deposit claim—not a new asset class replacing deposits, and not a retail crypto product. In BNY’s design, tokenized deposits are created as on‑chain digital book entries that represent participating clients’ existing demand deposit claims against the bank. Importantly, BNY says these balances continue to be recorded on its traditional systems to preserve regulatory and reporting integrity, while the mirrored on‑chain view supports faster movement and automation inside institutional workflows.

This distinction matters for fintech and DeFi-adjacent builders because it frames tokenized deposits as bank money on digital rails rather than a separate, bearer-style instrument. That typically implies tighter controls (identity, permissions, compliance checks), but also clearer alignment with institutional risk frameworks, accounting practices, and established treasury processes.

How BNY’s on‑chain cash capability is structured

BNY states the capability operates on its private, permissioned blockchain and is governed by the firm’s established risk, compliance, and control frameworks. From an architecture point of view, this signals a focus on privacy, selective access, and institution-grade governance—features many regulated institutions require before moving core cash workflows onto blockchain infrastructure.

BNY’s “mirrored representation” approach is also a pragmatic bridge pattern: the bank’s core ledger and reporting remain authoritative, while blockchain is used to orchestrate movement, automate conditions, and reduce operational friction. For market participants, the immediate payoff isn’t philosophical decentralization—it’s faster settlement cycles, continuous (24/7) operations, and programmability that can be embedded into collateral and margin actions.

Why collateral and margin is the first battleground

Collateral and margin are operationally heavy, time-sensitive processes that impact funding costs, risk exposure, and trading capacity. BNY is starting here because tokenized deposits can, in principle, enable:

• Near real-time cash mobility across approved participants

• Reduced settlement friction (fewer manual steps and cut-off constraints)

• Improved liquidity efficiency (cash can be positioned faster when needed)

• Programmable rules for internal controls (e.g., workflow-linked releases, pre-set constraints)

BNY also highlights the market’s shift toward an always-on operating model, where institutions want to move assets with greater certainty, transparency, and lower friction—especially as digital asset markets already function 24/7 and traditional markets increasingly experiment with extended hours.

BNY’s client quotes reinforce this direction. For example, ICE notes preparation for 24/7 trading and the potential integration of tokenized collateral across clearing infrastructure—exactly the kind of institutional upgrade path where on-chain cash becomes a foundational component rather than a standalone feature.

Tokenized deposits vs. stablecoins vs. tokenized money market funds

A recurring point of confusion in digital cash conversations is the overlap between stablecoins, tokenized money market funds, and tokenized deposits. BNY explicitly frames its digital cash strategy as connecting traditional banking infrastructure with multiple “digital rails,” naming stablecoins, tokenized money market funds, and tokenized deposits, and emphasizing interoperability among them.

For a fintech or DeFi-focused audience, a useful mental model is:

• Stablecoins: typically tokenized liabilities of an issuer backed by reserves; optimized for broad transferability, often across public chains.

• Tokenized money market funds: tokenized shares/claims on a fund structure; returns-driven cash management instruments.

• Tokenized deposits: tokenized representation of bank deposit claims; optimized for regulated, institution-to-institution cash mobility and workflow integration.

These instruments can be complementary. Tokenized deposits aim to bring regulated bank money into programmable settlement workflows—particularly where participants prioritize bank-grade controls and reporting continuity.

Programmable transactions: what “programmable money” looks like in practice

BNY’s messaging emphasizes programmable, rules-based cash movement. In real terms, programmability in institutional finance tends to mean constrained automation: the ability to attach policy and workflow logic to transfers—who can move funds, under what conditions, in what context, and with what audit trail.

Common institutional examples include:

• Automated cash posting and release tied to margin calls

• Conditional transfers triggered by clearing or risk events

• Pre-defined routing rules for treasury operations

• Improved reconciliation via consistent, shared transaction metadata

This is one of the clearer bridges between DeFi concepts and TradFi execution: programmability without necessarily adopting open, permissionless execution environments.

Participation signals: TradFi meets digital asset infrastructure

BNY lists early participation across both traditional financial institutions and digital asset ecosystem firms, including names such as Citadel Securities, DRW, Baillie Gifford, Circle, and Ripple Prime, among others. The mix is notable: it suggests tokenized deposits are being explored not only as a “bank innovation,” but as a coordination layer that could connect trading firms, asset managers, clearing venues, and digital-asset-native infrastructure in a controlled setting.

For the broader market, this is another signal that “tokenization” is moving beyond pilots that tokenize assets in isolation. Cash is the settlement layer; once cash becomes programmable and interoperable, more complex on-chain capital markets workflows become feasible.

Regulatory and accounting context: why structure matters

The initiative is explicitly designed to keep deposit balances within the regulated banking system while still enabling on-chain representation and movement. That “inside the perimeter” approach matters given ongoing scrutiny around custody, balance sheet treatment, and operational controls for digital assets in banking.

Cryptonews notes that BNY has also been making progress toward offering custody services for Bitcoin and Ether for exchange-traded product (ETP) clients, and references regulatory/accounting discussions tied to SEC guidance such as SAB 121 (and how certain structures may be treated differently).

For fintech teams, the key takeaway is less about any single accounting bulletin and more about design constraints: successful institutional on-chain cash systems tend to be built with auditability, controls, reporting continuity, and governance as first-class requirements.

What to watch next in the on‑chain cash race

BNY describes this as an early phase of a broader strategy, and several practical questions will define how impactful tokenized deposits become:

1. Interoperability: How seamlessly tokenized deposits connect with stablecoins, tokenized funds, and tokenized collateral.

2. Workflow expansion: Whether it moves beyond collateral and margin into broader payments, treasury, and settlement use cases.

3. Network participation and standards: Which venues, clearinghouses, and market participants adopt it—and under what technical/legal standards.

5. Operational performance: Settlement speed, uptime, privacy controls, and reconciliation outcomes in real institutional environments.

In short, BNY’s tokenized deposit pilot is a material milestone for institutional blockchain settlement, on-chain cash, and programmable finance—with an approach tailored to the realities of regulated market infrastructure rather than retail crypto narratives.