In a further push into bny tokenized deposits and blockchain-based finance, a major US custody bank is rolling out new digital cash rails for clients.
BNY Mellon unveils blockchain-based deposit representation
Bank of New York Mellon Corp. has launched a new tokenized deposit service designed to let institutional clients move funds using blockchain rails. The initiative makes the 240-year-old bank the latest global financial institution to expand its presence in digital assets.
The bank said on Friday that the product creates a form of digital cash that exists as an on-chain representation of deposits already held in client accounts at BNY. Moreover, this approach keeps underlying balances within the traditional banking environment while enabling on-chain transfers.
How the on-chain deposit model works
According to BNY, the new structure turns client balances into on-chain deposits that can circulate over blockchain payment rails while remaining fully backed by funds at the bank. However, the tokenized representation is intended as a technical wrapper, not a separate asset, and mirrors the underlying account position.
The institution highlighted several intended use cases, including collateral and margin movements within trading and clearing workflows. That said, the model also targets faster corporate and institutional payments where intraday liquidity and precise settlement timing are critical.
Use cases in collateral, margin and real-time payments
BNY said these tokenized balances could streamline how large clients post collateral to counterparties or clearing houses, especially in volatile markets. Moreover, using programmable assets on a blockchain could reduce settlement frictions that often arise with legacy payment networks.
In addition to trading-related activity, the bank expects the technology to accelerate high-value payments between institutional customers. The goal is to support operations that function around the clock, even when conventional payment systems are closed, by enabling on-chain transfers that sync back to core banking records.
Strategic move in the digital assets race
With the launch of bny tokenized deposits, the institution is positioning itself alongside other large banks exploring tokenized bank deposits as an alternative to stablecoins for institutional settlement. However, BNY is emphasizing regulatory alignment and direct backing by deposits held at a globally systemically important bank.
The Friday announcement underscores BNY Mellon’s broader push into bny digital assets infrastructure, including custody and settlement capabilities. Moreover, by building blockchain-native representations of traditional balances, the bank aims to bridge existing financial systems with emerging distributed-ledger networks.
Overall, the new bank tokenized deposits initiative illustrates how established custodians are experimenting with programmable money while keeping client funds within regulated banking accounts.
Source: https://en.cryptonomist.ch/2026/01/09/bny-tokenized-deposits/
