IBM, Swift and the Rise of Tokenised Bank Deposits

In July, the fight over digital money was playing out in Washington. Banks and crypto firms were lobbying over who gets to own the deposit, with stablecoin rewards at the centre and Congress stuck in the middle. Crypto was pushing into banking, and banks were mostly playing defence.

This week, the banks answered with infrastructure.

On Thursday, IBM connected its Digital Asset Haven platform to Swift’s blockchain-based shared ledger, letting banks instruct tokenised deposit transfers in ISO 20022, the message standard they already use for cross-border payments. The same day, seven UK banks completed the first live customer payments using tokenised sterling. Neither waited for Congress. The IBM feature is still in beta, and no banks have been named yet, but the direction is clear.

The upgrade banks already paid for

The significance of IBM’s move is less about replacing traditional payments and more about connecting blockchain capabilities to existing infrastructure.

Banks have already spent years migrating to ISO 20022, creating a common language for richer payment information. IBM’s adapter allows banks to use that same messaging layer to instruct tokenised deposit transfers rather than building entirely separate blockchain workflows.

That lowers one of the biggest barriers to adoption.

For most banks, the challenge was never whether blockchain technology existed. The challenge was integrating it into operations, compliance processes and risk frameworks that were built around traditional financial systems.

Tokenised deposits offer a compromise: banks can explore faster, programmable settlement while keeping deposits as regulated bank liabilities.

Tokenisation moves from experiment to infrastructure

The banking approach also fits into a wider regulatory shift.

Two days before IBM’s announcement, CFTC Chair Michael Selig told a New York Fed conference that US markets need to prepare for “mass tokenization” and “the world of onchain finance and 24/7 markets.”

His comments did not establish new rules or a timetable. But they reflect a broader change in the discussion: policymakers and financial institutions are increasingly focused on how tokenised assets should operate within existing markets.

The regulatory question remains open. Tokenisation could take several forms — including bank-issued digital deposits, stablecoins and other blockchain-based assets — and each model creates different questions around oversight, settlement, liquidity and access.

The infrastructure race behind digital money

The bank-led approach is part of a wider competition over what digital money infrastructure will look like.

The important point is that these models are not developing in isolation.

Banks are borrowing ideas pioneered by crypto networks: programmable assets, blockchain settlement and always-on transfers.

At the same time, crypto infrastructure is moving closer to traditional finance. Stablecoin issuers are expanding across multiple blockchain networks, while financial institutions are exploring how digital assets could become part of institutional settlement flows.

The question is increasingly less about whether blockchain enters finance and more about who controls the rails: banks, private digital money issuers, or open networks.

Why banks have a natural advantage

The strongest argument for tokenised deposits is that they build on what banks already control.

A tokenised deposit remains a claim on a regulated financial institution. The bank keeps the customer relationship, compliance obligations and balance-sheet connection.

That matters because many corporate payments are not simply about speed. They require:

• identity checks,
• regulatory oversight,
• liquidity management,
• accounting treatment,
• legal certainty.

For a multinational company moving money between subsidiaries, a blockchain-based transfer is only useful if it fits into existing treasury systems.

This is where IBM’s Swift integration becomes important. Instead of asking banks to build completely new blockchain processes, the approach attempts to make blockchain another payment rail connected to existing infrastructure.

Deposits remain bank liabilities, customer checks stay in place, and existing supervision still applies. For a corporate treasurer moving money between subsidiaries on a Sunday, that mix of speed and familiar protection is hard for a stablecoin to match.

It Works Beyond Banking Hours

The strongest argument for the bank model is that it is moving beyond experimentation. Swift activated its blockchain ledger with 17 banks in July, and in early September Citi moved US dollars across it with First Abu Dhabi Bank and OCBC, demonstrating tokenised deposit transfers outside the traditional cut-off windows that still shape much of correspondent banking.

The UK tokenised sterling pilot took a domestic approach. Its seven participants, including Barclays, HSBC, Lloyds and NatWest, tested use cases such as remortgage payments and consumer transactions, reaching a similar milestone during the same period.

The appeal for banks is clear: deposits remain bank liabilities, customer checks stay in place, and existing supervision still applies. For a corporate treasurer moving money between subsidiaries on a weekend, that combination of faster movement and familiar controls is the core attraction of tokenised deposits.

Where the bank model runs out of road

The first limit is settlement. Swift’s ledger coordinates payments around the clock, but final settlement still runs through existing systems such as central bank payment rails, which keep business hours. In the gap, banks are effectively trusting each other to make good once those systems reopen. That works among known partners in a pilot. At scale, it means exposure building up overnight and over weekends.

The second is fragmentation. A tokenised deposit is still a claim on the bank that issued it, so it moves easily inside its own network and awkwardly outside it. With Swift, the UK and US banks through The Clearing House each building separate systems, the risk is a set of fast lanes that don’t connect. Swift is betting it can be the link between them, as it was for payment messages decades ago. That only works if banks choose to join rather than guard their own networks.

Then there is scale. Seventeen pilot banks is a small fraction of the roughly 12,500 institutions on Swift’s network, and the proof of concept runs only until December, with small volumes by design. Stablecoins, meanwhile, already total around $300 billion and settle on-chain at any hour. A USDC token is the same wherever it goes. Bank tokens have to earn that portability. Stablecoins started with it.

What decides scalability from here

The bank model has momentum. It is live in two major markets, it works with the systems banks already run, and regulators are openly preparing for tokenised, always-on markets. What it still has to prove is that 24/7 instructions are enough while final settlement keeps office hours, and that separate bank networks will connect rather than compete.

The next few months should make that clearer. Swift’s decision on whether to scale beyond the pilot after December will show whether banks see enough value to commit. IBM naming clients would show real demand behind the adapter. And the UK group’s next phase, using tokenised deposits to settle digital assets, is where bank money and crypto meet directly.

Banks have shown they can adopt blockchain without changing how they work. The market will now test whether that is a strength or a ceiling.

Following the story with VT Markets

The companies building this infrastructure trade on public markets, though their share prices will answer to far more than one pilot. With VT Markets, you can trade share CFDs on IBM and Citi (CITI), as well as four of the UK banks in the tokenised sterling pilot: Barclays (BARC), HSBC, Lloyds (LLOY) and NatWest (NWG).

IBM’s share price is driven mainly by its software and consulting businesses, and the Swift integration remains an early beta within them. For the banks, tokenised deposits are part of a longer-term effort to keep customer money inside the regulated banking system. As the Swift and UK pilots report results, that effort becomes one more factor in how the market values them, alongside interest rates and earnings.

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