BNY Mellon, one of the world’s largest custodial banks, has launched a new on-chain mirrored representation of institutional deposit balances as part of an expanded digital cash and tokenization strategy. The capability runs on the bank’s private, permissioned blockchain and is aimed at enhancing settlement efficiency and liquidity for institutional clients.
The initiative, introduced via BNY’s Digital Assets platform, creates digital representations of clients’ existing demand deposit balances that can be transmitted and settled on-chain — while official record-keeping continues to reside in traditional banking systems to preserve regulatory, accounting and compliance integrity.
Bridging Traditional Banking and Blockchain Rails
Rather than issuing new currency, the tokenized deposit service essentially mirrors existing bank balances in a blockchain-compatible format that can be used for faster settlement, greater transparency and programmable transactions across financial workflows. Initially, the service will support collateral and margin operations for participating institutional users.
According to BNY, these mirrored on-chain cash balances aim to reduce settlement friction, improve liquidity management, and help institutions operate in near-real-time — a capability increasingly sought by markets moving toward continuous trading and settlement models.
Private Blockchain, Regulatory Alignment
The on-chain deposit representations operate on a private, permissioned blockchain controlled by BNY Mellon and are governed by the bank’s established risk, compliance and control frameworks. This ensures that while clients can leverage blockchain-based efficiencies, the underlying balances remain anchored in traditional core banking systems and subject to existing supervisory standards.
Carolyn Weinberg, Chief Product and Innovation Officer at BNY, highlighted that the launch supports institutional markets as they transition to “always-on operating models” and enables clients to execute transactions such as collateral moves or payments “with greater speed” while maintaining robust governance and compliance.
Industry Participation and Strategic Significance
Several major financial institutions and digital-native firms are involved in the initial phase, reflecting broad industry interest in tokenized cash instruments. Early participants include trading and clearing firms, asset managers and digital asset market makers — notably Intercontinental Exchange (ICE), Citadel Securities, DRW Holdings, Baillie Gifford, Circle and Ripple Prime.
Supporters of the initiative say it represents a pragmatic step in institutional adoption of tokenization technologies, enabling banks and markets to migrate cash and liquidity flows onto blockchain rails while preserving compliance with legacy regulatory frameworks.
Looking Ahead
BNY Mellon’s rollout places it among leading global banks exploring tokenized deposit solutions — following similar efforts by financial giants like JPMorgan and HSBC. By enabling on-chain representations of traditional deposits, the bank aims to pave the way for more efficient collateral, payments and settlement processes within institutional finance.
As markets continue evolving toward always-on operations and digital rails, initiatives like BNY’s tokenized cash services highlight the ongoing convergence of traditional banking infrastructure and blockchain-enabled settlement networks.
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