According to a newly published analysis, Citigroup (Citi) believes that Tokenize bank deposits are likely to play a central Vai in on-chain payment operations for financial institutions, surpassing stablecoins in core banking system use cases.
According to Citi, banks tend to prefer tokenized deposits over stablecoins because:
- The legal framework is clearer, as Tokenize deposits remain within the licensed banking system.
- Leverage the bank's existing infrastructure (core banking, KYC/AML, risk management).
- This reduces the need to build new legal frameworks, such as those for third-party-issued stablecoins.
This approach allows banks to bring fiat currency onto the blockchain without disrupting the traditional custody model. Citi emphasizes that tokenized deposits enable real-time, 24/7, Capital movement between different accounts, entities, or jurisdictions.
The key point is that all transactions still take place within the regulated banking system, which helps to: reduce reconciliation time, optimize liquidation , and limit counterparty risk in institutional payments. This is particularly suitable for interbank payments, securities transactions, repo, FX, and Capital market products.
While valuing tokenized deposits, Citi does not deny the role of stablecoins. However, the bank believes that stablecoins will be more complementary than replacements, with a focus on the following uses:
- Off-bank payments
- Trade with crypto-native partners.
- These scenarios require open interoperability between multiple blockchain networks.
In other words, stablecoins fit into the “outer perimeter” of the financial system, while tokenized deposits reside at the core of operation.
Citi's perspective reflects a clear trend among global banks: putting blockchain into practical operation, but in a way that increases efficiency without sacrificing financial stability. If tokenized deposits are widely implemented, the financial system could witness:
- Instant payments between major institutions
- Reduce reliance on traditional intermediary infrastructure.
- Increase the speed and transparency of on-chain Capital markets.
