This week, an interesting piece of news came out — the world's top custodial bank has officially moved on-chain services from the lab to real-world applications. The Bank of New York Mellon (BNY Mellon) announced the launch of tokenized deposit functionality for institutional clients. This venerable financial institution with over 240 years of history has finally implemented real-world applications on the blockchain.

How big is the scale? Currently, this bank holds assets worth up to $57.8 trillion for its clients, manages approximately $2.1 trillion, and processes about $2.5 trillion in daily transactions in its treasury department. This is not a small project; it’s a formal move by a giant financial institution.

So, what’s the difference between tokenized deposits and regular stablecoins? The key distinction lies here — tokenized deposits are interest-bearing liabilities issued directly by the bank. In other words, your asset value directly corresponds to the bank’s account system, not an independent asset floating in the air. This means risk management and asset security are anchored in the regulated traditional financial system.

On the technical side, they operate on a private, permissioned blockchain within the bank. Simply put, digital ledger entries mirror your actual balance in the bank in real-time. The benefit of this approach is that assets remain secure within the regulatory system while being able to circulate on-chain at near real-time speeds, satisfying margin requirements or inter-institutional collateral transfers.

This design concept is quite interesting — it’s neither the traditional stablecoin approach nor fully decentralized, but finds a balance between the two worlds. For institutional investors, this could be a significant turning point.