Tokenized Deposits Herald the End of ‘End of Day’ Banking

Rather than replacing deposits or payment rails, banks are exploring tokenized deposits as a way to represent existing balances on distributed ledger infrastructure, with the goal of improving settlement timing, transparency and operational efficiency.

That focus reflects growing recognition that legacy payment processes, built around batch windows and delayed settlement, are increasingly out of step with the needs of large corporate and institutional clients. The growth in tokenized deposits will, in effect, herald the end of the “end of day” construct of time-staggered settlements.

According to a report from the Federal Reserve Bank of New York’s Financial Services Policy Committee Digital Assets Working Group, tokenized deposits can enable instantaneous clearing and settlement while reducing some forms of operational and settlement risk. And just this week, in “What 2026 Will Make Obvious,” PYMNTS CEO Karen Webster noted that tokenized deposits are gaining traction precisely because they allow banks to extend existing deposit economics onto blockchain infrastructure without changing ownership, regulatory treatment or balance-sheet integration, and in fact represent an “upgraded” form of money.

What Tokenized Deposits Actually Do

Tokenized deposits do not create new money. They represent traditional commercial bank deposits in tokenized form, backed one-for-one by funds held on bank balance sheets. Deposits can settle atomically, meaning that the exchange of cash and assets occurs simultaneously.

Because tokenized deposits operate on distributed ledger infrastructure, they can move on a continuous basis rather than within fixed processing windows. That capability allows funds to move 24/7 and provides real-time visibility into balances, but it also removes the timing buffers that many internal banking processes depend on.

These characteristics are most relevant in high-value and business-to-business contexts, where settlement delays and intraday liquidity uncertainty remain common.

Executives at large banks have generally framed tokenization as an extension of existing transaction banking capabilities rather than a standalone product.

At Citi, CEO Jane Fraser said during the company’s most recent earnings call that the bank has integrated Citi Token Services with 24/7 U.S. dollar clearing, part of what she termed “always-on, cross-border, multi-bank solutions.” JPMorgan Chase CEO Jamie Dimon has taken a similar approach, describing the firm’s tokenized efforts as long-running operational initiatives.

Why Continuous Settlement Creates Pressure

Tokenized deposits introduce operational pressure precisely because they remove time-based pauses. Batch processing, end-of-day posting and daily reconciliation cycles are embedded in treasury, accounting and risk systems.

When settlement occurs continuously, liquidity positions change throughout the day and across jurisdictions. Treasury teams must move away from estimating intraday positions toward monitoring balances as they update. Accounting systems designed around end-of-day posting face pressure to recognize cash movements closer to real time.

The most significant work associated with tokenized deposits lies in internal process change rather than payment speed. Treasury operations must shift from periodic liquidity checks to continuous monitoring.  Where BaaS can help is at the orchestration and integration layer: exposing APIs that let banks and their clients connect real-time balance views, payment initiation, treasury workflows and reporting into corporate systems.

That’s the practical “mindset and technical shift” from periodic to continuous control: banks need infrastructure that can publish and consume events continuously across systems and counterparties.

These changes require coordination across technology, finance and risk teams. They also expose limits in legacy systems that were not designed for always-on money movement.

As for the shift itself, as Webster wrote: “When programmability arrives without requiring disruption, institutional money will choose continuity and predictability every time. That choice, more than hype or volume, is what will shift the center of gravity back inside the bank.”