Banks pursue alternative to stablecoin issuance as regulatory framework takes shape
The Clearing House, the bank-owned operator of core U.S. payment infrastructure, announced on June 5 a network enabling banks to settle tokenized deposits on-chain around the clock while keeping customer balances inside regulated deposit accounts.
The move reflects a strategic pivot by the banking industry away from direct stablecoin issuance toward a tokenized-deposit model that preserves the bank-liability structure of traditional deposits. The network will support 24/7 on-chain clearing and settlement while linking to established fiat rails such as RTP and CHIPS.
Tokenized deposits differ structurally from stablecoins. Deposits remain bank liabilities recorded on distributed ledger technology, whereas stablecoins are claims on issuer reserves. The distinction matters under emerging regulation. The GENIUS Act, which creates a framework for payment stablecoins, requires one-to-one reserves and prohibits issuer-paid interest or yield solely for holding stablecoins. Critically, the GENIUS Act excludes deposits recorded using distributed ledger technology from the payment stablecoin definition.
The Clearing House already operates a DDA Token Service that replaces customer account numbers with tokens for secure compliance management. The new network extends this capability to on-chain settlement.
The timing aligns with regulatory moves across multiple agencies. In February, the OCC issued a notice of proposed rulemaking on GENIUS Act implementation. In April, the FDIC published a proposed-rule summary on deposit insurance for stablecoin reserves, clarifying that deposits held as reserves backing payment stablecoins would not be pass-through insured to stablecoin holders. The FDIC also stated that deposit insurance treatment does not depend on whether deposits are recorded using distributed ledger technology.
Bank-industry groups have escalated warnings about stablecoin competition. In December, the Federal Reserve published a note on stablecoin effects. The American Bankers Association and 52 state bankers associations warned Congress that stablecoin yield incentives risk disintermediating deposit taking and lending.
The Federal Reserve’s analysis, however, frames the risk more conditionally. “Stablecoins can reduce deposits, recycle deposits into different forms, or change the structure of bank funding even when the total volume of deposits does not fall,” the Fed stated in its December note. The central bank emphasized that effects depend on demand source, reserve investment, and central-bank account access.
In April, the Council of Economic Advisers modeled the lending impact of eliminating stablecoin yield. The baseline scenario projected $2.1 billion in impact, but the worst-case scenario reached $531 billion, reflecting wide uncertainty about deposit-flight magnitude.
Market data underscores the scale of the stablecoin sector. As of June 8, stablecoins held a $296 billion market cap, with USDT at $187 billion and USDC at $76 billion. The broader crypto market was valued at $2.2 trillion.
Citi research forecasts that bank-token transaction volumes may exceed stablecoin volumes by 2030. The bank’s base-case forecast projects $1.9 trillion in stablecoin issuance by 2030, with a bull case reaching $4.0 trillion. These projections suggest institutional demand for on-chain settlement infrastructure will grow substantially.
The Clearing House is owned by 25 of the nation’s largest financial institutions. The network’s launch timing, ledger design, operating rules, and public-chain interoperability approach have not been specified.
