The oldest US bank wants to revolutionize payments with blockchain and tokenized deposits.

BNY Mellon is exploring tokenized deposits for blockchain payments, seeking efficiency, liquidity, and modernization for the financial sector.

Bank of New York Mellon (BNY Mellon), the oldest financial institution in the United States, with more than 240 years of history had offered us, is exploring a project that could transform the way global payments move. According to a recent Bloomberg report, this bank is working on launching tokenized deposits, an innovation that would allow its customers to make payments directly on blockchain networks.

The magnitude of this initiative is hard to ignore. BNY Mellon processes around $2,5 trillion in daily payments and safeguards nearly $55,8 trillion in assets under management. If it successfully integrates blockchain into its infrastructure, the impact would not only be internal but could redefine efficiency standards in the international financial system.

BNY Mellon explores the potential of tokenized deposits

Tokenized deposits work as digital representations of traditional bank deposits. In practice, they are digital tokens that are equivalent to money deposited in a bank account, but that circulate on a blockchain network with the same security as traditional funds. The key difference is the speed and programmability that technology brings. Thanks to the benefits of blockchain, transfers could be settled in seconds, and smart contracts would allow for the automation of treasury operations that currently require manual and costly processes.

Carl Slabicki, head of BNY Mellon's treasury services platform, explained at the interview with Bloomberg that the goal is Overcoming the limitations of legacy technology and modernizing real-time payments, both domestic and cross-border, with blockchain. 

Tokenization takes over traditional banking

BNY Mellon's interest in blockchain technology is part of a broader trend, with large financial institutions already experimenting with similar solutions. JPMorgan, for example, launched tests with JPMD, a token that represents dollar deposits on the Base network, while HSBC introduced a tokenized deposit service for corporate clients. Even SWIFT, the global interbank payments network, announced recently integrated a blockchain-based shared ledger in collaboration with Consensys and more than 30 financial institutions.

In addition, BNY Mellon had already taken steps towards the blockchain industry. The bank, along with Goldman Sachs, He launched a system that allows customers to invest in money market funds with ownership records stored on the blockchain. It also launched its platform earlier this year. Digital Asset Data Insights, which transmits fund accounting data to Ethereum via smart contracts, with the goal of improving transparency and accuracy of information.

The bank's tokenized deposit pilot seeks to demonstrate that payments can be settled in seconds without leaving the protection of the regulated banking system. In an environment where international transfers often take days and accrue fees, the promise of efficiency is clear. According to Deloitte, by 2030 one in four large-value cross-border transfers could be made on tokenized rails, which would mean an annual savings of $50.000 billion in commissions for the companies.

On the other hand, the market is already showing signs that tokenization is scaling beyond experiments. Platform data RWAxyz reveals that tokenized US Treasury bonds outperformed 8.000 million, a figure that shows how chain settlement is beginning to consolidate in large-volume financial assets.

Efficiency versus stability

The innovation that BNY Mellon is exploring with tokenized deposits is not without challenges. On the one hand, the European Banking Authority (EBA) recently published a report warning of the need to clearly define what tokenized deposits are under the MiCAR regulatory framework, to avoid confusion with electronic money. The agency also warned that the programmability of these deposits could alter customer behavior in times of crisis, affecting the system's liquidity.

Similarly, the International Monetary Fund (IMF) agrees that tokenization can reduce settlement risks by incorporating trust and programmability into ledgers. However, it also warns that the interconnection of multiple blockchains could spread financial contagion more rapidly in stressful situations if governance does not evolve at the same pace as the technology.

Amid these debates, BNY Mellon's pilot program is emerging as a benchmark for both regulators and central banks. Its experience will allow us to see how the efficiency and speed offered by blockchain tokenization can be combined with the security and stability demands of global financial markets. The challenge, ultimately, is not just technical or regulatory, but one of balance: advancing innovation without compromising trust in the system.

A transition that begins in retail

As large banks and corporations push forward with tokenization pilot projects, some analysts argue that the real initial push could come from small investors. Max Gokhman of Franklin Templeton believes that individual customer flows could be responsible for providing the necessary liquidity in this initial phase, while institutional investors await more defined regulatory frameworks and deeper secondary markets.

Recent experience with exchange-traded funds (ETFs) and other tokenized products shows that retail users are often the first to adopt new digital financial tools. This could accelerate the transition to an ecosystem where tokenized deposits coexist with traditional ones, offering customers more options and banks new ways to compete on efficiency.

BNY Mellon's move, therefore, goes far beyond a technological experiment. It's a strategic move in the midst of the boom in the tokenization of real-world assets, ranging from bonds to real estate. 

The Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, recently invested in Polymarket to integrate market data on blockchain, a clear sign that global financial infrastructures are evolving towards an increasingly digital environment and native to this technology.

BNY Mellon moves toward tokenized banking

In short, BNY Mellon's tokenized deposit project reflects the convergence of traditional banking and blockchain innovation. With over two centuries of history, the institution seeks to demonstrate that it is possible to move money as quickly as cryptocurrencies, but with the backing and credibility of a regulated bank.

The potential benefits are clear: real-time payments, reduced costs, and increased transparency. However, technological and regulatory challenges remain significant. International supervisors are focusing on how these initiatives can transform financial infrastructure without compromising the stability of the system.

If BNY Mellon's pilot program succeeds in scaling up, it could mark a milestone in the modernization of global payments and open the door to a new era in the relationship between blockchain and banking. As Bloomberg noted, the experiment seeks to lay the foundation for an infrastructure capable of sustaining the volume and trust required by the global financial system.