From De-Banking to On-Chain Banking: Financial Institutions Reclaim the Digital Realm

From De-Banking to On-Chain Banking: A Shift in the Digital Financial Landscape

For the past decade, the narrative of “decentralization” has dominated the world of digital currencies. Bitcoin challenged sovereign monetary systems, stablecoins reshaped payment logic, and decentralized finance (DeFi) threatened to make banks seem slow and inefficient. However, since 2024, this balance appears to be shifting, with banks making a strong comeback.

No longer passively observing, banks are striving to regain control of the digitalization of money through “tokenized deposits.” These are not new currencies, but simply on-chain reflections of bank deposits. Each token represents a real account balance, combining the blockchain liquidity of stablecoins with the legal validity of bank liabilities.

This marks the beginning of the “second stage” of financial digitalization: a transition from the “decentralized rebellion” of the crypto world to the “institutional on-chain integration” by the banking system.

Singapore: A Pioneer in Institutional Cross-Chain Integration

DBS Bank in Singapore and JP Morgan's Kinexys are developing a framework for cross-chain interoperability of deposit tokens. The plan aims to enable instant interoperability between JP Morgan's Deposit Tokens (based on Ethereum L2 Base) and DBS's permissioned chain.

In the future, corporate funds may be able to settle freely 24/7 between different banks and chains, without the need for SWIFT or clearing banks. This embodies Singapore's consistent regulatory logic: not resisting new technologies, but institutionally absorbing them. They see deposit tokens not as a replacement for stablecoins, but as a compliant and evolved version of them.

Hong Kong: Regulatory Ambitions to Create a “Multi-Layered Currency” Framework

In late October, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, announced in an article titled “Paving the Way for Hong Kong's Digital Economy” that Hong Kong will establish a multi-layered digital currency system encompassing the Central Bank Digital Hong Kong Dollar (CBDC) + Tokenized Deposits + Regulated Stablecoins.

This framework reflects Hong Kong's institutional way of thinking:

• Central Bank Level: Enhancing control over sovereign currency through the digital Hong Kong dollar.
• Commercial Bank Level: Supporting enterprise-level payments and clearing using tokenized deposits.
• Market Level: Allowing stablecoins to circulate in the Web3 ecosystem.

Hong Kong is not betting on a single form of digital currency, but building a multi-layered, co-existing, and mutually reinforcing currency ecosystem, allowing innovation, regulation, efficiency, and security to coexist side-by-side.

United Kingdom: A Pragmatic Approach to Institutional Experimentation

In September of this year, six major banks, including HSBC, Barclays, and Lloyds, launched a pilot program for tokenized British pounds, expected to last until mid-2026. The pilot scope extends beyond cross-border payments to include mortgage processes and digital asset settlement.

Andrew Bailey, Governor of the Bank of England, once stated: “The significance of tokenization lies in making old systems more efficient, not in creating new risks.” This statement encapsulates the core strategy of the United Kingdom: institution first, then release. Before implementing stablecoin regulation, the UK chose to conduct controlled experiments using “tokenized deposits,” trading regulatory predictability for innovation foresight.

Japan: A Pragmatic Shift Under a Conservative Exterior

Japan has always been cautious, but it is quietly progressing. SBI Shinsei Bank is testing the use of tokenized deposits for cross-border payments to reduce the costs and delays of foreign exchange clearing within and outside of Asia.

Compared to the slow progress of Central Bank Digital Currencies (CBDC), tokenized deposits offer Japan a more realistic middle ground: they fall within the regulatory system and can improve efficiency first. This is the consistent logic of Japanese financial policy: completing structural shifts in a “sound environment.”

Sovereignty, Efficiency, and Vision

From a global perspective, tokenized deposits are not just a technological experiment, but also a race for monetary sovereignty and institutional modernization. Stablecoins have allowed the dollar to expand globally on the blockchain, but at the same time, they have reduced the control of national central banks over digital forms of their currencies.

Tokenized deposits offer another possibility: reshaping settlement efficiency and system liquidity without giving up sovereignty, with institutions as the border and the blockchain as the foundation. The future monetary system may include three levels:

• Central Bank Level (CBDC): Sovereignty and Clearing
• Bank Level (Tokenized Deposits): Payments and Credit
• Market Level (Stablecoins and Real-World Assets): Global Liquidity and Asset Digitalization

These are not substitutes for each other, but collectively form the infrastructure of the new financial system. Real-world assets are truly entering the blockchain.

A recent report by BNY Mellon indicates that by 2030, the total size of stablecoins and tokenized cash will reach US$3.6 trillion, with tokenized deposits and money market funds accounting for half of this amount. This means that the blockchain is moving from an external experimental laboratory in the financial system to the foundation of the financial system.

“Going on the blockchain” is no longer a technological choice, but an institutional evolution. This veil of “institutional blockchain entry” is slowly rising in the depths of the global banking system.