Lede
BNY, a financial services company that traces its roots back to one of the oldest financial institutions in the United States, launched tokenized bank deposits for its institutional clients on Friday. These tokenized bank deposits are defined as onchain cash balances or depositor claims against a bank, representing a digital evolution of traditional cash holdings. According to an announcement from the company, BNY will issue these deposits on an in-house permissioned blockchain network. The service is tailored specifically for institutional clients, utilizing the private nature of the blockchain to facilitate the secure management of digital assets.
By launching this service, BNY integrates blockchain technology directly into its institutional offerings, allowing for the creation of digital representations of cash. These onchain deposits act as direct claims against the bank, providing a modernized framework for liquidity management. The use of a permissioned blockchain ensures that the institution maintains control over the network while offering the technical benefits of onchain records. This initiative marks a significant step for the institution as it adapts its services to the growing institutional interest in digital asset infrastructure and onchain settlement solutions.
Context
The move by BNY is the latest blockchain-related development from a major financial institution, as banks and established players in traditional finance overhaul legacy financial infrastructure to meet the demands of the digital age. The current legacy financial system relies on a complex web of intermediaries and does not operate during nights, weekends, or certain holidays. This structure can leave investors and traders stuck in positions when the market is closed, creating inefficiencies in a global economy that increasingly operates without downtime.
Blockchain technology offers a potential solution by removing intermediaries and functioning around the clock, which can reduce settlement times, transaction costs, and friction in cross-border commerce. Institutions are actively seeking faster and more efficient ways to move assets, focusing on achieving greater settlement certainty, transparency, and lower friction. By adopting onchain solutions, financial organizations aim to modernize their operations and unlock liquidity that is often constrained by the limitations of traditional, intermediary-heavy settlement cycles. This transition reflects a broader recognition among major banks that digital-age demands require a fundamental shift in how financial infrastructure is built and maintained.
Impact
The onchain deposits launched by BNY will be used to support collateral and margin requirements, providing institutional clients with a more efficient way to manage their obligations. BNY has indicated that there may be additional functionality for these deposits in the future. As global financial markets shift towards an always-on operating model, institutions are looking for tools that offer greater settlement certainty and transparency. Real-world asset (RWA) tokenization, which involves representing physical or traditional assets on a blockchain, is identified as a key tool that enables 24/7 capital markets across various asset classes.
By providing tokenized deposits, BNY enables its clients to move assets with lower friction, which is particularly beneficial for high-stakes financial activities like maintaining margin requirements. The capability to unlock liquidity through onchain balances addresses the need for faster asset movement in a competitive environment. Furthermore, the use of tokenization can be extended to traditionally illiquid assets, such as real estate and collectibles, allowing them to be traded or used as collateral within a continuous market framework. This development aligns with the institutional goal of reducing the delays and costs associated with traditional asset movement and settlement.
Outlook
In September 2025, the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) released a joint statement proposing a shift to 24/7 capital markets. The regulators noted that expanding trading hours could better align US markets with the evolving reality of a global, always-on economy. This proposal signals a growing regulatory interest in supporting continuous market operations and leveraging technology to modernize financial infrastructure. However, the SEC and CFTC also acknowledged that 24/7 onchain markets and tokenization are more “viable” for certain asset classes and not others.
The regulatory agencies cautioned that a “one-size-fits-all” approach to always-on markets may not be workable, suggesting that the transition will be nuanced and dependent on the specific characteristics of different financial instruments. Despite these considerations, the recognition of tokenization as a tool for enabling continuous markets highlights the long-term direction of the industry. As major institutions like BNY continue to deploy permissioned blockchain solutions, the financial landscape is expected to see a gradual move toward 24/7 functionality. This shift will likely be characterized by a balance between the efficiency of onchain technology and the regulatory requirements of various asset classes.
About the Author
