The effort uses a private blockchain to mirror deposit balances, which speeds up settlement and unlocks liquidity.

BNY, the world’s largest custodial bank, has taken its first significant step toward tokenization by allowing institutional clients to settle bank deposits on blockchain.

According to a statement released on Friday, the Wall Street giant, which manages almost $58 trillion in assets, is launching a platform that mimics customer balances on a private blockchain to assist speedier settlement and liquidity management.

The move comes as BNY is testing blockchain deposits to improve its payment settlement procedure. Last year, the bank stated that it was testing tokenized deposits as part of its attempts to modernize its worldwide payment system.

“Tokenized deposits provide us with the opportunity to extend our trusted bank deposits onto digital rails — enabling clients to operate with greater speed across collateral, margin, and payments, within a framework built for scale, resilience, and regulatory alignment,” said Carolyn Weinberg, BNY’s chief product and innovation officer, in the release.

Tokenization is the process of converting real-world assets into blockchain-based tokens.

Around the clock settlement

BNY announced that the feature is now available on its Digital Assets platform, allowing institutional clients to represent their existing deposit claims as onchain entries. These tokenized balances are intended to streamline collateral and margin procedures, two areas of finance where cash must frequently be moved quickly and reliably.

The platform is built on a permissioned blockchain managed by BNY and is subject to the company’s established risk, compliance, and control frameworks, according to the bank.

However, BNY will continue to record actual bank balances on traditional ledgers in order to maintain regulatory compliance.

It’s not the first bank to invest in blockchain settlement technology. More financial institutions are looking to move away from traditional systems that only run during business hours and toward digital infrastructure that can settle assets 24/7.

JPMorgan launched its JPMD token in June on Coinbase’s Base blockchain, and nine banks in Europe are developing a MiCA-compliant euro stablecoin.