Institutional Digital Money: From Proprietary Platforms to Shared Interbank Rails

The Evolution of Institutional Digital Money

Institutional digital cash is evolving rapidly as tokenized deposits, blockchain-based payments and tokenized securities settlement move into production. Rather than converging around a single form of digital money, banks and financial institutions are developing at least five distinct digital-cash and settlement architectures:

1. Proprietary bank tokenized-deposit platforms such as JPMorgan's Kinexys platform

2. Shared networks for independently issued bank deposits focused on domestic interbank payments such as Cari Network

3. Interoperability layers connecting separate bank ledgers such as Swift

4. Multi-bank clearing and settlement networks such as Partior

5. Wholesale digital cash backed by central-bank reserves such as Fnality

Proprietary tokenized deposits remain the leading model

With daily transaction volume totalling single digit billions, the most mature implementations have so far come from global banks building proprietary tokenized-deposit platforms:

• JPMorgan has developed proprietary blockchain-based deposit infrastructure through Kinexys.

• Citi offers tokenized cash and trade capabilities through Citi Token Services.

• HSBC and other global institutions are developing comparable platforms for corporate and institutional clients.

The biggest GSIBs can fund the underlying blockchain, identity, wallet, compliance, liquidity and integration infrastructure internally. They also have sufficiently large client networks to create activity within their own platforms.

However, most of these systems remain principally intra-bank networks. They allow customers of the same bank to transfer value on that institution’s proprietary ledger.

This improves speed and availability, but the money largely remains within a single bank’s network.

But outside the largest global banks, most institutions lack the resources or the commercial justification to build and operate their own blockchain infrastructure.

Most banks cannot justify proprietary infrastructure

There are approximately 3,850 community banks in the United States and around 2,000 smaller and medium-sized banks in the euro area. Many cannot independently justify the cost and operational complexity of developing a proprietary tokenized-deposit network.

This is not unusual in banking.

Smaller banks do not independently build every component of the traditional payment stack. Instead, they use a combination of:

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