The tokenized bank: How traditional lenders are quietly building the bank of the future
This article, written by Dr. Aysun Herges, Lead Researcher at CARF, explores how tokenization is quietly reshaping the core infrastructure of modern banking. Rather than focusing on flashy pilots, Dr. Herges examines how major institutions are rebuilding payments, liquidity, and settlement systems to meet the demands of a continuous, global economy.
Tokenization is often described as the next big thing in finance, but that framing misses what is actually happening inside banks. Large institutions are not moving into tokenized money because they want to look innovative. They are doing it because parts of banking infrastructure still work too slowly, too narrowly, and too expensively for a global, always-on economy.
That is why the most interesting tokenization story is no longer about headline-grabbing pilots. It is about plumbing. Cross-border payments still face cut-off times, trapped liquidity, and multiple reconciliation layers. Collateral often sits in fragmented systems when it could be mobilized faster. Treasury teams still manage liquidity across jurisdictions with tools that were built for banking hours, not for continuous global operations. Tokenization matters because it offers a way to redesign those pipes rather than merely adding another digital interface on top of them.
The Bank for International Settlements has increasingly framed tokenization in exactly these terms: as part of a next-generation monetary and financial system rather than a speculative side trend. That is an important shift. Once tokenization is treated as infrastructure, the conversation becomes less about slogans and more about settlement design, interoperability, legal certainty, and risk controls.
Several bank-led initiatives show that this shift is becoming operational. J.P. Morgan's Kinexys unit has become one of the clearest examples. The business has already processed very large volumes through its blockchain-based payments infrastructure, and in January 2026 Kinexys and Digital Asset announced plans to bring JPM Coin, identified in that announcement with the ticker JPMD, natively to the Canton Network. More important than the branding is the strategic direction: a major bank is trying to make regulated digital money more portable across a broader institutional environment rather than keeping it inside one closed system.
Citi is pushing in a similar direction. Citi Token Services expanded in late 2025 to include euro transactions and a larger Dublin footprint, reinforcing its aim of offering around-the-clock liquidity and cross-border payments for institutional clients. This is where tokenized deposits become commercially meaningful. A multinational treasury team does not care about blockchain for its own sake. It cares about whether cash can move when needed, across currencies, without waiting for the next operating window of a legacy system.
Singapore's Project Guardian also deserves attention because it has gone beyond generic experimentation. The initiative has worked on tokenized funds, fixed income, and transaction banking use cases, including the use of tokenized bank liabilities for cross-border settlement and liquidity management. What makes Guardian valuable is not just the pilots; it is the effort to define common frameworks that could support scaling and interoperability.
Europe is now adding a stronger public-sector layer to the story. In March 2026, the European Central Bank (ECB) published the Appia roadmap and confirmed that Pontes, due in the third quarter of 2026, will connect DLT-based market infrastructures to Eurosystem settlement in central bank money. This matters because tokenized finance becomes much harder to scale if it lacks a trusted public settlement anchor. The ECB is clearly signaling that innovation in Europe should not drift into a fragmented patchwork dominated by private money alone.
The strategic question, then, is not whether tokenization belongs in banking. It is which form of digital money will sit closest to the core of institutional finance. Stablecoins may continue to grow in some payment and market segments, but banks still hold an advantage where clients need balance-sheet strength, compliance integration, governance, and supervisory accountability. That is why tokenized deposits and related bank-issued instruments are getting serious attention.
There are also risks that deserve more honest treatment. A bank built around batch operations cannot suddenly become a twenty-four-hour institution without rethinking liquidity management, controls, and incident response. Interoperability remains fragile. Legal treatment still varies across jurisdictions. Programmability sounds efficient until a dispute, operational failure, or sanctions issue forces someone to decide who can stop, reverse, or prioritize a transaction. These are not side issues. They are central to whether tokenized banking infrastructure earns trust.
The most likely winners will not be the banks making the loudest claims. They will be the ones that solve the dull but decisive issues: legal enforceability, accounting treatment, standards, controls, core-system integration, and cross-platform compatibility. In wholesale finance, boring execution usually beats bold messaging.
The tokenized bank is therefore not best understood as a futuristic bank with a blockchain strategy. It is a bank that is gradually rebuilding payments, liquidity, collateral, and settlement processes so they function with less friction and more programmability. That may sound less dramatic than many tokenization headlines. But it is also much closer to the real transformation now underway.
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