JPMorgan and Citibank have adopted blockchain technology for financial operations, with JPMorgan moving more than $3 trillion through its Kinexys platform and Citi processing billions in cross-border payments daily. However, their tokenized payment services remain limited to institutional customers and permissioned networks, leaving retail consumers without access to these innovations.
Monument Bank, a U.K. challenger bank with approximately $2.4 billion in assets, plans to tokenize up to 250 million pounds of retail customer deposits on Midnight, a privacy-focused blockchain. The deposits would remain interest-bearing, fully backed by Monument, and redeemable one-for-one in pounds sterling, with Financial Services Compensation Scheme protection subject to the scheme's limits.
The Institutional Focus
Banks have primarily used tokenized deposits for internal projects and institutional purposes. Mintoo Bhandari, founder of Monument Bank, noted that most tokenized coins used for money transfer remain internal projects. This separation reflects both technical challenges and business priorities among large financial institutions.
Technical and Privacy Barriers
Connecting private bank blockchains to external systems without exposing sensitive transaction data presents a significant obstacle. Midnight uses zero-knowledge proofs, a technology designed to allow banks to verify that customers or transactions meet set conditions without placing underlying personal data onchain. This approach addresses regulatory requirements while protecting customer privacy.
Treasury operations at major institutions often juggle multiple systems for the same function—a tokenized deposit for one client, a regulated stablecoin for another, and a conventional correspondent account for a third. This fragmentation creates capital inefficiency when liquidity becomes locked across multiple networks.
Retail Tokenization Plans
Monument's approach differs from stablecoin issuers because it holds a banking license allowing it to pay interest on deposits. The company plans to offer tokenized savings accounts that earn yield, with customers accessing the service through a conventional banking app without needing to understand cryptocurrency or blockchain technology.
The longer-term strategy includes providing customers access to fractional private equity, tokenized structured products, and Lombard lending within a regulated banking application. Bhandari indicated that if successful, Monument plans to license the infrastructure to other banks through Monument Technology.
The central challenge facing the industry is not whether banks can tokenize money—they already have the capability. Rather, the question is whether they can deliver tokenized financial products to consumers while maintaining the privacy, regulatory safeguards, and trust that distinguish bank deposits from cryptocurrency tokens.
