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.

“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.

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.

Private bank blockchains can serve as internal blockchain ledgers, but connecting them to external ledgers without exposing sensitive information is more difficult. Midnight uses zero-knowledge

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proofs, designed to let a bank verify that a customer or transaction meets set conditions without putting the underlying personal data onchain, Syed said.

Take a fund that gets paid back in stablecoins on a Saturday morning. The crypto side settles fine, but if the fund needs that money to cover a margin call before markets open Monday, it has a problem, which is that the prime broker’s treasury operates during banking hours and does not accept digital assets. The cash is sitting there, but it cannot be used.

“The capital exists, it’s just dislocated,” David said. “It’s simply not usable where and when it’s needed.”

Monument said it plans to tokenize up to 250 million pounds ($335 million) of retail customer deposits on Midnight. The deposits would remain interest-bearing, fully backed by Monument and redeemable one-for-one in pounds sterling, with Financial Services Compensation Scheme protection subject to the scheme’s limits.

“Nobody yet has actually enabled retail to directly participate in tokenization,” Bhandari said. The platform is designed so customers never know or need to know they are using blockchain or cryptocurrency. Instead, Bhandari said, the customer experience would resemble a normal sterling deposit that can be withdrawn on demand.

The longer-term aim is to give those customers access to fractional private equity, tokenized structured products and Lombard lending inside a regulated banking app, subject to the relevant permissions.

If it works, Bhandari said, his bank will license the infrastructure to other banks through a vehicle called Monument Technology. The larger test is not whether banks can tokenize money. They already can. It is whether they can make that money useful to consumers without sacrificing the privacy, regulatory safeguards and trust that distinguish a bank deposit from a crypto token.