BNY, the world's largest custodian bank, begins to launch tokenized deposit products

Source: PortaldoBitcoin Original Title: BNY, the world’s largest custodian bank, begins tokenizing deposits Original Link: BNY is the world’s largest custodian bank, and the institution announced on Friday (9th) that it will begin issuing digital deposit representations on the blockchain for its clients.

In a blog statement, this institution, co-founded by Alexander Hamilton, described the move as a fundamental step to enhance its ability to move “programmable funds and on-chain assets” through digital channels.

The product is supported by BNY’s own private and permissioned blockchain. It is targeted at institutions and “digital natives.”

BNY’s tokenized deposits are described as digital ledger issuances, representing funds that participating clients can withdraw through traditional means. The bank stated that the tokens will initially be used in scenarios related to collateral and margin.

Tokenization reduces clearing friction

This move highlights how traditional Wall Street financial institutions are increasingly adopting digital assets to enhance their existing operations. BNY emphasized the ability of tokenized deposits to “reduce clearing friction” and “improve liquidity efficiency across different scenarios.”

The company pointed out that although client balances will be represented on the blockchain, for compliance purposes, they will continue to be recorded in BNY’s traditional systems.

In a statement, Carolyn Weinberg, BNY’s Chief Product and Innovation Officer, emphasized the reliability of the institution’s bank deposits. This bank, which has been around for over 240 years, protected $57.8 trillion in assets on behalf of clients in September. The New York-based giant also manages $2.1 trillion in assets.

While some competitors, such as major exchanges, are expanding tokenized deposits to different networks, BNY stated that its product version will serve as a “connective fabric of BNY’s digital infrastructure,” including a tokenized money market fund launched in partnership with Goldman Sachs in July.

Since establishing its digital asset division in 2021, the company has begun managing private keys for clients and launched custody services for Bitcoin and Ethereum.

BNY’s statement includes declarations from about a dozen crypto-native companies, including crypto bank Anchorage Digital, stablecoin issuers Circle and Paxos, tokenization expert Securitize—backed by BlackRock—and Ripple’s institutional brokerage platform Ripple Prime.

“Seeing BNY take this step to facilitate the realization of tokenized deposits is a milestone moment for digital currency adoption,” said Nathan McCauley, co-founder and CEO of Anchorage Digital.

Citadel Securities, which accounted for 25% of U.S. stock trading volume in July, also described tokenization as a key to the future of finance. The market-making giant’s CEO, Ken Griffin, previously called cryptocurrencies a “call to holy war” against the US dollar in 2021.