How U.S. Banks Are Quietly Preparing for an Onchain Future

Key takeaways

• US banks are prioritizing tokenized versions of familiar products, including deposits, funds and custody, rather than launching new crypto-native assets.

• Most onchain bank activity is taking place in wholesale payments, settlement and infrastructure, largely out of public view.

• Regulators are increasingly allowing crypto-related banking activities, but only within tightly supervised and risk-managed frameworks.

• Public blockchains such as Ethereum are being tested by major banks, but exclusively through controlled and compliant product structures.

US banks are not racing to issue speculative crypto products. Instead, they are methodically rebuilding core financial plumbing, including payments, deposits, custody and fund administration, so these services can operate on distributed ledgers. The work is incremental, technical and often invisible to retail customers, but it is already reshaping how large institutions think about money movement and settlement.

Rather than embracing unregulated crypto assets, banks are focusing on tokenization, the process of representing traditional financial claims, such as deposits or fund shares, as digital tokens recorded on a ledger. These tokens are designed to move with embedded rules, automated settlement, real-time reconciliation and reduced counterparty risk while remaining within existing regulatory frameworks.

Tokenized cash: Deposits that move like software

One of the clearest signals of this shift is the rise of tokenized deposits, sometimes described as “deposit tokens.” These are not stablecoins issued by nonbanks. Instead, they are digital representations of commercial bank deposits that are issued and redeemed by regulated banks.

JPMorgan has been among the earliest movers. Its JPM Coin system, launched for institutional clients, is positioned as a deposit token that enables real-time, 24/7 transfers on blockchain-based rails. According to JPMorgan, the system is used for peer-to-peer payments and settlement between approved clients.

In 2024, JPMorgan rebranded its broader blockchain unit as Kinexys, framing it as a platform for payments, tokenized assets and programmable liquidity rather than as a standalone “crypto” initiative.

Citi has taken a similar path. In September 2023, the bank announced Citi Token Services, integrating tokenized deposits and smart contracts into its institutional cash management and trade finance offerings. By October 2024, Citi said its tokenized cash service had moved from pilot to live production, processing multimillion-dollar transactions for institutional clients.

These initiatives are not happening in isolation. The New York Fed’s New York Innovation Center (NYIC) has published details of a regulated Liability Network (RLN) proof of concept involving banks, including BNY Mellon, Citi, HSBC, PNC, TD Bank, Truist, U.S. Bank and Wells Fargo, as well as Mastercard.

The project simulated interbank payments using tokenized commercial bank deposits alongside a theoretical wholesale central bank digital currency (CBDC) representation, all within a controlled test environment.

Did you know? Beyond cash and funds, major US banks are actively considering the tokenization of real-world asset classes such as private credit and commercial real estate. This could unlock onchain liquidity and fractional ownership, an area where traditional finance may gain an edge over typical crypto-native models.

Custody and safekeeping: Building institutional-grade controls

For any onchain system to work at scale, assets must be held and transferred under robust custody and governance standards. US banks have been steadily building this layer.

BNY Mellon announced in October 2022 that its Digital Asset Custody platform was live in the US, allowing select institutional clients to hold and transfer Bitcoin (BTC) and Ether (ETH). The bank positioned the service as an extension of its traditional safekeeping role, adapted for digital assets.

Regulators have been clarifying what is permitted. The Office of the Comptroller of the Currency (OCC), in Interpretive Letter 1170, stated that national banks may provide cryptocurrency custody services for customers. The US Federal Reserve has also weighed in, publishing a 2025 paper on crypto-asset safekeeping by banking organizations that outlines expectations around risk management, internal controls and operational resilience.

At the same time, regulators have emphasized caution. In January 2023, the Federal Reserve, Federal Deposit Insurance Corporation and OCC issued a joint statement warning banks about risks associated with crypto-asset activities and relationships with crypto-sector firms.

Tokenized funds and collateral move onto public blockchains

Beyond payments and custody, banks are also experimenting with the tokenization of traditional investment products.

In December 2025, J.P. Morgan Asset Management announced the launch of the My OnChain Net Yield Fund (MONY), its first tokenized money market fund. The firm said the fund’s shares are issued as tokens on the public Ethereum blockchain and that the product is powered by Kinexys Digital Assets.

Reportedly, JPMorgan seeded the fund with $100 million and described it as a private, tokenized representation of a traditional money market fund rather than a crypto-native yield product.

This step is significant because it links tokenized cash and tokenized yield-bearing instruments within familiar regulatory structures, illustrating how traditional asset managers are testing public blockchains without abandoning established compliance models.

Did you know? Some US banks and market participants are exploring tokenization’s role in preserving traditional trading revenue by integrating digital asset trading and brokerage infrastructure directly into bank systems. This approach allows them to keep execution, spreads and post-trade services in-house even as tokenized markets grow.

Regulation: Permitted, but closely supervised

The regulatory environment has been evolving alongside these pilots. In March 2025, the OCC clarified that national banks may engage in certain crypto-related activities, including custody and some stablecoin and payment functions, and rescinded earlier guidance that required banks to seek supervisory non-objection before proceeding.

The OCC has also issued a series of interpretive letters addressing related issues, including banks holding deposits backing stablecoins (IL 1172) and using distributed ledger networks and stablecoins for payments (IL 1174), alongside examination guidance explaining how supervisors will review such activities.

Taken together, these developments show a banking sector preparing for an onchain future in a cautious way by adapting existing products, embedding them in supervised environments and testing new infrastructure long before it reaches the mainstream.