Tokenized deposits push Europe toward next-gen digital money

As banks rewire payments and settlement systems, tokenized deposits are emerging as a central piece of the new onchain cash stack for global finance.

Major banks push tokenized deposits onto blockchain rails

Tokenized deposits are gaining momentum as leading banks test fresh ways to move commercial bank money onto blockchain infrastructure. A new report from RWA.io sets out how these instruments are evolving alongside stablecoins and central bank digital currencies, or CBDCs, within a layered digital money stack.

The report, published with input from Citi, BNY, JPMorgan‘s Kinexys, Standard Chartered, ABN Amro, and Digital Asset, argues that tokenized deposits now form a core layer in the expanding onchain cash stack. Moreover, several European pilots have already moved beyond proof-of-concept into live market testing.

These instruments are direct bank liabilities and benefit from existing deposit insurance regimes. As a result, they slot neatly into current regulatory frameworks while complying with strict Anti-Money Laundering and Know Your Customer rules, a contrast with many privately issued stablecoins.

This more regulated footing gives banks confidence that they can deploy tokenized instruments at scale. Consequently, institutions increasingly view them as a credible way to bring commercial money onto blockchain-based networks without undermining existing prudential safeguards.

UK tokenized deposit pilots set early benchmarks

In January, Lloyds Banking Group and Archax executed the United Kingdom’s first tokenized deposit transaction on a public blockchain. The deal ran on the Canton Network, marking a significant milestone for European banking experiments with tokenized liabilities.

At the same time, UK Finance is coordinating its Great British tokenized deposit pilots, an industry-wide program running through mid-2026. The initiative is testing peer-to-peer payments, remortgaging flows, and digital-asset settlement, all powered by tokenized claims on bank balances.

UK Finance has said that tokenized deposits will play a “vital role” in a future multi-money world, where different forms of digital money coexist. However, the group stresses that these instruments are designed to complement, rather than replace, both privately issued tokens and publicly backed digital money.

This positioning places tokenized deposits alongside stablecoins and CBDCs as core digital instruments. Banks are treating them as a bridge between traditional account-based infrastructure and new banking digital rails running on distributed ledger technology.

Commercial money as the backbone of digital finance

According to RWA.io co-founder Marko Vidrih, the global financial system still largely runs on commercial bank balances, not purely on central bank reserves. “Bringing that money onto digital rails will underpin the next generation of digital finance,” he said, highlighting the strategic importance of bank-issued tokens.

Vidrih added that it is essential to understand how tokenized deposits sit within the wider digital money ecosystem. That said, he emphasized their interaction with stablecoins and CBDCs, noting that each instrument will likely serve distinct use cases within an integrated system.

This perspective aligns with the broader industry view that tokenized bank liabilities could support day-to-day payments, treasury operations, and securities settlement. Meanwhile, central bank money would continue to anchor systemic stability, with regulated stablecoins serving niche or cross-border roles.

ECB advances digital euro and tokenized market plumbing

The European Central Bank (ECB) is progressing digital euro work just as dollar-backed stablecoins gain traction in cross-border transactions. To shape digital euro infrastructure, the ECB recently opened applications for experts to join several workstreams focused on technical design and user adoption.

These expert groups will assess how a digital euro could function across ATMs, payment terminals, and retail acceptance points. Moreover, the ECB plans a 12-month pilot in the second half of 2027, giving the Eurosystem time to test retail and wholesale use cases under real-world conditions.

In March, the ECB unveiled Appia, a long-term framework for Europe’s tokenized financial markets. Appia describes how blockchain-based platforms could settle transactions using central bank money, creating a foundation for european tokenized finance that interoperates with legacy payment systems.

A central component of Appia is Pontes, a mechanism designed to connect distributed ledger platforms to Eurosystem payment infrastructure. Pontes is scheduled to launch in the third quarter of 2026, aligning with wider efforts to upgrade the region’s financial market plumbing.

Pontes links DLT platforms to TARGET Services

The Eurosystem’s existing TARGET Services infrastructure processes large-value euro payments and securities settlement across Europe. However, current systems were not built for token-based settlement, so they cannot natively support assets issued and traded on blockchains.

Pontes will extend TARGET Services to distributed ledger-based platforms operating throughout the region. This link aims to allow transactions in tokenized assets to settle in central bank money, reducing counterparty risk and reinforcing financial stability as tokenization scales.

Feedback gathered through the Appia consultation will help refine the legal, technical, and operational parameters of Europe’s broader tokenized market structure. Furthermore, the process signals that European regulators are not only supervising private experiments but actively constructing the public rails for fully digital money.

Toward a multi-money digital financial system

The convergence of tokenized bank liabilities, stablecoins, and CBDCs is reshaping global payment architecture. Banks are moving quickly to issue tokenized deposits to defend and extend their role in payments, liquidity management, and deposit-taking as new market entrants gain ground.

Each instrument appears to be finding its place: tokenized bank money for retail and institutional payments, regulated stablecoins for programmable and cross-border flows, and CBDCs as a sovereign anchor. Together, these layers are laying the foundation for a multi-money digital financial system where commercial bank money, public money, and private tokens coexist.

As pilots progress in 2026 and the ECB prepares its 2027 digital euro test, the coming years will determine how quickly these models move from experimentation to mainstream adoption. The outcome will shape both Europe’s financial infrastructure and the global direction of digital money.