Why Wall Street Giants Build Tokenization Money for Institutions, Not Regular Consumers

The two biggest U.S. banks run blockchain systems that handle trillions of dollars, yet their tokenized payment offerings are mostly restricted to institutional clients and walled-off networks. That is the opening Monument Bank is pursuing, a U.K. challenger bank that intends to tokenize as much as £250 million in interest-bearing retail deposits on Midnight. The plan calls for zero-knowledge proofs to shield customer information while satisfying regulatory demands.

The goal of the project is to let customers get tokenized investments and lendings through a standard banking app without needing to know anything about cryptocurrency. It rests on the idea that regulated, interest-bearing bank accounts might one day grant retail clients access to tokenized assets without consumers having to handle crypto themselves.

The Institutional Divide

The Kinexys blockchain platform handles more than $3 trillion in transactions for JPMorgan, while Citi Token Services processes billions in cross-border payments daily. Both are solid illustrations of major financial institutions updating their old systems and embracing blockchain for cross-border payments. Neither, however, serves the ordinary person with a savings account.

That gap is not an accident. “Most of the coins that have been minted and are being used for money transfer are all internal projects,” said Mintoo Bhandari, founder of Monument Bank, a U.K. challenger bank with a roughly $2.4 billion balance sheet.

“Is that really moving the needle for the whole bank and for the consumer? Not yet.”

The main split in the tokenized-money argument concerns who gets to use these systems. Banks are placing tokenized deposits and payments onto blockchain infrastructure, yet most projects still confine themselves to serving institutional customers or operating within permissioned networks. The firms Monument and privacy-focused blockchain Midnight believe that regulated, interest-bearing bank deposits can eventually open tokenized investments and lending to everyday customers without those customers needing to grasp crypto.

Legacy Architecture Limits

“99% of the banks in the world are like, ‘Yeah, we’re really digital, we have an app!'” Bhandari said. “But the reality is they’re struggling with legacy architectures that go back to the 1970s that they cannot leap.”

Jerald David, CEO of Lynq Network, described how treasury desks at major institutions run three separate systems for the same task. One client gets a JPMorgan tokenized deposit, another receives a regulated stablecoin, and a third is given a conventional correspondent account. Each moves money for the same purposes, yet each runs on its own distinct infrastructure.

“What clients can’t afford are separate pools of liquidity locked up on every network they access, because idle liquidity fragmented across five networks is five times the capital inefficiency of idle liquidity sitting in one place,” he said.

A tokenized deposit keeps its nature as a claim upon the bank that issued it, unlike a stablecoin. Interest may accrue upon it, it stays inside the regulated banking system, and it could be built to settle against tokenized assets. The open question is whether banks can bring those advantages to customers without sacrificing privacy, compliance, or their hold over who owns the deposit.

The Data Privacy Problem

Monument has a banking licence, according to Bhandari, which lets it pay interest on deposits — something he noted distinguishes it from stablecoin issuers. He also said the company intends to provide tokenized savings accounts that generate yield.

Fahmi Syed, president of the Midnight Foundation, pointed to a distinct problem with public blockchain infrastructure: banks cannot reveal their clients’ transaction data or commercial relationships.

Syed noted that JPMorgan and Citibank have acknowledged this on their own, “Once you create a private blockchain, how do you then speak to another private blockchain? You then have to use a bridge or some other mechanism, and at that point, you have data leakage.”.

Internal blockchain ledgers for private banks can operate as their own isolated systems, yet linking them to external ledgers without revealing sensitive details poses a challenge. Midnight addresses this by employing zero-knowledge proofs, which safeguard customer data while still satisfying regulatory obligations.

The Retail Test Case

Midnight is being positioned as a platform for tokenized retail customer deposits, with Monument planning to tokenize up to 250 million pounds ($335 million). The tokens will keep their interest-bearing status, be fully backed by Monument, and remain redeemable one-for-one in pounds sterling, with Financial Services Compensation Scheme protection subject to the scheme’s limits.

“Nobody yet has actually enabled retail to directly participate in tokenization,” Bhandari said. The platform is designed so customers never know or need to know they are using blockchain or cryptocurrency. Instead, Bhandari said, the customer experience would resemble a normal sterling deposit that can be withdrawn on demand.

Subject to the necessary permissions, the ultimate goal is to grant those customers access to fractional private equity, tokenized structured products and Lombard lending through a regulated banking app.

Bhandari said that if his bank’s system succeeds, it would license the underlying infrastructure to other banks via a vehicle known as Monument Technology. The real test, he argued, is not about banks’ ability to tokenize money — they already have that capacity — but rather their ability to make that tokenized money genuinely useful to consumers while preserving the privacy, regulatory protections and trust that set a bank deposit apart from a crypto token.

How The Projects Compare

What This Means For Consumers

The takeaway is straightforward: tokenized money is on its way, though it will arrive first within institutional walls. JPMorgan and Citi have shown that the technology can handle large volumes, yet their systems remain shut to ordinary customers. Monument is attempting to breach that divide by allowing retail depositors to hold tokenized funds without ever needing to see a crypto address.

A number of factors need to line up for this to work. Privacy must be preserved through the use of zero-knowledge proofs. Regulatory obligations must be managed by the Midnight infrastructure. And the experience for customers has to remain simple enough that they don’t notice the blockchain beneath it.

Whether tokenization ends up helping consumers depends on what the tokens actually do. A tokenized deposit that merely sits in a wallet is nothing more than a novelty. But if it earns interest, settles against other tokens and expands access to new investment choices, then it has real value. Monument is wagering that both things can exist together, and that banks can deliver them without forcing customers to master a whole new vocabulary.

Monument aims to make tokenized money available to everyone else, attempting to alter the current state of affairs. The success of that effort will hinge on whether the underlying technology can deliver on its promise.

Source material: “Why Wall Street giants build tokenization money for institutions, not regular consumers,” CoinDesk.

blockchain · cryptocurrency · retail banking · stablecoins · tokenization