Banking Innovation: How Stablecoins and Tokenized Deposits Are Reshaping the Financial Landscape

Author: David Dobrovitsky, Translated by Shaw Jinse Finance

The Evolving Role of Banks

For more than a century, banks have been the foundation of the financial system—managing deposits, facilitating payments, and providing credit. Today, that role is changing.

With the rise in popularity of stablecoins and tokenized assets, financial institutions are no longer isolated from the blockchain. Instead, they are beginning to incorporate the efficiencies of the blockchain into traditional services, reshaping how deposits, credit, and payments actually work.

Deposits: From Accounts to Tokens

Deposits have always been the lifeblood of the banking industry. Today, they are being redefined as tokenized deposits—digital representations of commercial bank funds that exist on the blockchain but remain fully backed and regulated.

• JPMorgan’s JPM Coin currently handles over $1 billion in wholesale payments per day.

• Singapore’s Project Guardian is piloting tokenized deposits and asset trading with global banks.

• Societe Generale and BBVA have issued tokenized bonds and loans, settled entirely on-chain. Tokenized deposits allow banks to maintain their central position in the system while opening up new digital rails for payments and capital markets. Stablecoins and Bank Loans Understanding the functional differences between stablecoins and bank deposits is crucial. Banks utilize deposits using a fractional reserve model, using them for mortgages, commercial loans, and credit creation. This fosters economic growth, but also introduces risks. Stablecoins, by contrast, are designed to be fully backed 1:1 by reserve assets such as U.S. Treasuries or cash equivalents. They maintain value and offer liquidity, but do not provide loan funding or generate loan income.

  This discrepancy raises a key question: What happens to credit creation if more money flows into stablecoins?

  Decentralized Lending as a Complement

  One ​​answer lies in decentralized lending protocols such as Aave, Compound, and Maple. These platforms enable stablecoin lending against digital assets, enforced by smart contracts, and secured by overcollateralization.

  For banks, the opportunity is twofold:

  • Act as liquidity providers, injecting institutional money into decentralized credit pools.

  • Build a permissioned, compliant version of DeFi lending suitable for regulated environments.

  This way, decentralized protocols can reintroduce credit creation, while stablecoins themselves are passive.

  Payments: Building a Faster, Smarter Infrastructure

  Payments have always been a strength of the banking industry. Now, blockchain offers banks new ways to enhance payment systems:

  • Using tokenized deposits for cross-border settlements, reducing reliance on correspondent banks.

  • On-chain networks that connect directly to corporate treasuries.

  • Working with central banks on CBDC pilots to ensure interoperability between public and private currencies.

  These innovations don’t replace SWIFT or Visa, but rather complement them in terms of speed, efficiency, and global reach.

  Banks’ Strategic Outlook

  Blockchain won’t replace banks, but will broaden their toolkit:

  • Deposits → Tokenization allows commercial bank funds to remain relevant in the digital age.

  • Stablecoins → Store value but require new lending frameworks.

  • DeFi Lending → Provides a complementary avenue for credit creation.

  • Payments → Enables near-instant settlement while strengthening existing payment channels.

  Forward-looking institutions are positioning themselves as active participants in digital finance, combining transparency and programmability with their traditional strengths in trust, compliance, and risk management.

  Conclusion: Relying on Innovation

  From JPM Coin to Project Guardian, from tokenized bonds to decentralized lending, the convergence of blockchain and banking has begun.

  This is not a story of disruption but one of adaptation and opportunity: banks are combining the advantages of regulation and trust with the transparency, speed, and global reach of blockchain.

  The future of money is likely to be hybrid—banks, stablecoins, and decentralized protocols working together, as banks shape the direction of credit and payments in a digital-first economy.