Note: This article is speculative. It explores potential futures around tokenised bank deposits, CBDCs, and the shifting role of banks and central banks. It is not financial advice, but a thought experiment about where money could be heading.
Imagine you wake up in a few years and the money in your bank account isn’t just a number on a screen. It’s a digital token you can transfer instantly, 24/7, anywhere in the world. It’s programmable: your rent pays itself on the first of the month, your paycheck arrives by the hour instead of every two weeks, your savings automatically sweep into higher-yield accounts.
On the surface, nothing has changed — you still “have money at JPMorgan.” But behind the scenes, your deposit has become something new: a tokenised deposit.
And here’s the kicker: if enough banks roll this out, the system you’re using could look and feel exactly like a central bank digital currency (CBDC) — even if the Federal Reserve never issues one. It would be a shadow CBDC, built and run by the banking system itself.
1. What Exactly Are Tokenised Bank Deposits?
Tokenised deposits are simply bank deposits represented as blockchain tokens.
- They are still liabilities of a commercial bank (say JPMorgan).
- They still carry the protections of ordinary deposits (FDIC insurance in the U.S., regulatory capital requirements, etc.).
- They may still pay interest, just as your deposit account does today.
But instead of being a static entry in a database, they exist as transferable digital tokens. This makes them:
- Instant → settle immediately, not days later.
- Programmable → rules and conditions can be coded into the money itself.
- Composable → they can plug into digital asset ecosystems and tokenised securities.
It’s the same deposit, upgraded for the blockchain era.
2. CBDC vs. Tokenised Deposits
On paper, the difference is stark:
- CBDC → liability of the central bank. Risk-free, like cash.
- Tokenised deposit → liability of a commercial bank. Private credit risk, though insured up to a point.
In practice, if you’re just paying your friend back or moving money abroad, both look and feel like digital dollars.
That’s why observers worry tokenised deposits could evolve into a shadow CBDC: not officially public money, but indistinguishable in daily use.
3. KYC, Yield, and Transfers
Here’s where the user experience details matter:
- KYC at onboarding → To hold a tokenised deposit, you must already be a customer of the issuing bank. That means full Know Your Customer (KYC) checks. Once you’re approved, the tokens themselves can move instantly — no need to redo KYC for each transaction.
- Transferring to others → You can only send to other wallets/accounts that are also KYC’d and approved. Want to send to a friend abroad? That friend must hold an account (or wallet) at a participating bank that’s plugged into the same network. This keeps the system compliant but prevents tokenised deposits from circulating freely like cash or crypto.
- Interest and yield → Whoever holds the token at a given time is the legal depositor and earns the interest from that moment onward. If you transfer your JPM token to me, you stop earning interest and I start. The bank’s systems track this just as they do when deposits move between accounts.
So unlike stablecoins — which generally don’t pay yield — tokenised deposits preserve the economics of traditional deposits, shifting interest rights automatically with ownership.
4. JPM Coin: First Domino
JPMorgan has already launched JPM Coin (JPMD). Currently it’s only available for wholesale clients: corporates moving large sums across JPMorgan’s own network. It’s not for retail — yet.
But the concept is there: a large, systemic bank issuing a blockchain-based dollar token backed 1:1 by deposits. Scale this out across multiple banks, connect them through an interoperable network (sometimes called a Regulated Liability Network), and you have the makings of what feels like a national digital dollar system.
From a user’s perspective, it’s basically a CBDC — even if technically it’s just bank money.
5. Why Banks Want This
Banks see both opportunity and threat in digital money:
- Efficiency → Traditional rails like ACH or SWIFT are slow and clunky. Tokenised deposits settle instantly, cutting costs.
- Programmability → Smart contracts can automate payments, escrow, trade finance, and even retail money flows like payroll and bills.
- Defense against stablecoins → Stablecoins like USDC or Tether are siphoning off billions of dollars into parallel payment ecosystems. Tokenised deposits let banks compete on equal digital terms.
- CBDC hedge → Many banks fear a retail CBDC could disintermediate them. If customers can hold digital dollars directly at the Fed, why keep money in bank deposits? Tokenised deposits are banks’ way of saying: “We’ll provide the digital dollar — no need for the Fed to step in.”
6. The Levers of Control
Here’s where things get unsettling. Programmable, tokenised money is not just about efficiency. It also opens new levers of control for both banks and governments:
- Programmability of payments → Money can be coded with rules. It could be made to expire if not spent by a certain date, restricted to certain categories of goods, or blocked from reaching certain recipients.
- Embedded compliance → Every token can be tracked in real time, with built-in controls preventing transfers to sanctioned addresses or flagged users.
- Identity and scoring → If tokens are tied tightly to KYC’d identities, it’s easy to imagine overlays of credit scoring, reputation systems, or even social credit metrics guiding how money flows.
- Policy levers → Governments could use tokenised deposits (or CBDCs) to fine-tune stimulus: instant universal transfers, targeted subsidies, negative interest on idle balances. This massively increases state control over money as a tool of economic and social policy.
For retail users, the risk is that your “deposit” stops feeling like neutral cash and starts behaving like a permissioned token, whose uses are shaped by the combined interests of your bank and the state.
7. The Shadow CBDC Scenario
Put this all together, and you can see how tokenised deposits become the foundations of a shadow CBDC:
- Issued privately by banks but indistinguishable from a government CBDC in daily use.
- Carrying interest, unlike stablecoins.
- Fully KYC’d and controlled, unlike cash.
- Programmable, trackable, and policy-sensitive in ways that traditional deposits are not.
If scaled across major banks, such a system could make the Federal Reserve’s direct retail role redundant. In effect, the U.S. might end up with a digital dollar system controlled by its largest commercial banks — with government leverage layered on top through regulation and policy.
8. Why This Matters
Money is not just “plumbing.” It is power.
- A CBDC centralises that power in the state.
- Tokenised deposits keep it in private banks — but give those banks (and regulators overseeing them) new levers of surveillance, control, and policy enforcement.
If you zoom out, tokenised deposits could represent the biggest shift in money since the creation of the Federal Reserve itself. The everyday user may not notice the difference — but behind the scenes, the balance of power over money issuance and control could tilt dramatically toward the alliance of big banks and government.
9. What About the Federal Reserve?
If tokenised deposits scale, it’s not just retail payments that change — it’s the very architecture of U.S. monetary power.
Some possibilities:
- Fed remains intact → issuing reserves to banks, while tokenised deposits form the retail layer.
- Fed issues a CBDC → but tokenised deposits compete or interoperate, creating a dual system of public and private digital dollars.
- Fed is folded into the Treasury → effectively ending central bank independence, with digital money controlled directly by the state.
- Big banks take over → a system like JPM Coin becomes so pervasive that commercial bank money is, for all practical purposes, the digital dollar. The Fed’s role shrinks to backstopping crises, not issuing money for daily use.
- Hybrid future → some blend of the above, where the lines between Fed, Treasury, and the largest banks blur.
In all these scenarios, the clear theme is concentration of power. Tokenised deposits don’t just change how we move money — they reshape who controls money itself.
Final Thoughts
The debate over CBDCs often frames the future of money as a binary choice: either the Fed issues a digital dollar, or it doesn’t. But tokenised deposits reveal a third path — a shadow CBDC, built not by the central bank but by the commercial banking system itself.
That path could mean faster payments and powerful new tools for financial innovation. Or it could mean the merging of state and banking power into a money system that is programmable, surveilled, and controlled at levels we’ve never seen before.
And if that happens, the bigger question may not be “Should the Fed issue a CBDC?” but rather:
Does the Fed itself still need to exist?
Will it be replaced by banks like JPMorgan that already act as de facto issuers of digital dollars? Will it be absorbed into the Treasury, collapsing the wall between monetary and fiscal power? Or will it evolve into a shadowy backstop while the real power shifts to an alliance of banks and state?
We may be entering a future where the distinction between public money and private money — between the Fed and Wall Street — becomes so blurred that it ceases to matter. The real contest is already underway.
And the quiet rollout of tokenised deposits may be the first sign that the future of money will not be chosen in Washington alone, but in the boardrooms of the biggest banks.
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