There is a narrow window of opportunity for banks to position tokenized deposits as an alternative to stablecoins for customers seeking the convenience of cheap, blockchain-enabled payments. Stablecoins processed an estimated $1.3 trillion in payments in 2024, and with 2025 at an end, that figure has almost certainly risen. That’s not trading volume or DeFi speculation. It’s actual payments.
Real businesses moving real money for cross-border settlements, vendor payments, and treasury operations. That’s $1.3 trillion in genuine transaction volume moving outside the banking system, creating relationships banks don’t own and generating data they can’t see. When did banks lose the payments business to technology they could have built themselves? The answer matters less than what comes next.
Tokenized deposits give banks a way to compete on the same rails stablecoins run on, with advantages stablecoins can’t easily replicate. But the window won’t stay open indefinitely. Treasury managers are forming habits around which rails they use and who they trust to move money instantly. Every quarter that passes is another quarter of customer behavior hardening around alternatives to traditional banking.
The danger isn’t that stablecoins exist. Circle earned $711 million in Q3 2025 from interest on USDC reserves while paying token holders nothing. One issuer, one quarter, capturing float income that used to belong to banks. Tether holds $185 billion. Circle holds $61 billion.
The total stablecoin market sits at $305 billion, generating roughly $13 billion annually in float income flowing to issuers instead of financial institutions. But the revenue is not the real loss. The real loss is the payment relationship. When a business routes a cross-border payment through USDC instead of a wire transfer, that’s a transaction the bank doesn’t see.
No data on payment patterns. No insight into cash-flow timing. No opportunity to suggest a treasury product, a credit facility, or a foreign exchange hedge.
The payment happens in a closed loop between sender, stablecoin issuer and recipient. Banks become infrastructure for on-ramps and off-ramps (useful when customers need to convert between fiat and crypto, irrelevant for everything in between). Stablecoins proved what banks spent years saying wasn’t necessary: businesses want 24/7 settlement, instant cross-border transfers, and programmable money that plugs into smart contracts and automated workflows.
The market validated that demand with an estimated $1.3 trillion in payment-specific volume, according to Boston Consulting Group analysis. That’s distinct from the larger figures often cited that include trading activity and non-payment transfers. Even at $1.3 trillion, stablecoins now represent a meaningful payment infrastructure, roughly 8% of Visa’s annual volume ($15.7 trillion) and 13% of Mastercard’s ($9.8 trillion), for technology that barely existed in payment use cases five years ago. The efficiency gap explains the adoption.
International wire transfers cost $40 to $50 plus intermediary fees pushing total costs to 2% to 7%. Tokenized settlements run 0.5% to 2%, sometimes as low as $1 to $5 per transaction. Treasury managers are paid to notice obvious math, and the math here is obvious. Tokenized deposits do everything stablecoins do.
Same blockchain rails, same 24/7 instant settlement, same programmability for smart contracts and automated treasury operations. But they come with advantages stablecoins can’t easily match: FDIC insurance, regulated infrastructure, established customer relationships and interest paid directly to holders.
The yield advantage is real, but the bigger advantage is trust. When a bank offers tokenized deposits, that’s a regulated banking product with FDIC insurance and two centuries of institutional credibility behind it. When a fintech offers yield on a tokenized product, customers ask about counterparty risk.
That brand equity is worth billions in customer confidence. You can’t manufacture it through marketing or venture capital. The regulatory framework supports this. The FDIC stated in March 2025 that deposits are deposits, regardless of the technology. Insurance applies to tokenized deposits the same way it applies to traditional ones. The Conference of State Bank Supervisors called for joint federal guidance in November 2025 defining tokenized deposits as bank liabilities, removing the legal ambiguity that stalled earlier adoption.
Banks also control something stablecoins are still trying to build: the customer relationship. Once a treasury operation runs workflows on your tokenized rails, switching costs become prohibitive. Payment data generates insights about cash-flow patterns, seasonal liquidity needs and growth trajectories. Those insights create advisory conversations leading to credit facilities, interest rate hedging, fee income that multiples whatever gets earned on float.
Stablecoins handle transactions. Banks own relationships. Tokenized deposits let you do both.
The infrastructure already exists. The USDF Consortium provides blockchain infrastructure specifically for banks issuing tokenized deposits. Vantage Bank and Custodia issued the first U.S. tokenized deposits in March 2025, expanding to a regional and community bank consortium by October. The Independent Bankers Association of Texas launched a shared tokenized deposit platform for member banks in October 2025. Shared infrastructure eliminates execution risk.
Industry standards are emerging. Compliance frameworks get developed collectively. Community banks gain advantages money center banks lack. They’re nimble enough to implement faster than institutions where every decision requires committee approval across six divisions. They have commercial relationships that fintech can’t replicate because those relationships took decades to build. They have trusted brands in markets where customers want their banker to explain what’s happening and why it’s safe.
The timeline matters because windows close. BlackRock launched BUIDL in March 2025 and reached $2.9 billion. JPMorgan’s USD Deposit Token went live in June 2025. HSBC launches in the first half of 2026. Regional and community banks moving now position themselves as innovators. Move later and you’re meeting market expectations instead of setting them.
The question isn’t whether payments become programmable and instant. That’s already happening at $1.3 trillion in annual volume. The question is whether banks will compete for those relationships with tools that work on the rails customers are already using, or watch someone else own the treasury management conversation while banks provide on-ramps and off-ramps for a payment system they don’t control.
The gap between deciding to compete and actually competing has always been banking’s vulnerability. This time, the market isn’t waiting for committees to finish deliberating.
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