Cross-Border Fund Transfers Battle: The Silent Struggle Between Tokenized Deposits and Stablecoins
On May 20th, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was advanced by the United States Senate, marking a significant recognition of privately issued dollar tokens, which have grown too considerable to ignore. Previously, in July 2024, the Monetary Authority of Singapore (MAS) expanded its four-year-old Project Guardian pilot, inviting DBS, HSBC, and Standard Chartered to issue on-chain versions of customer deposits for foreign-exchange and repo trades. These separate jurisdictions employ distinct methods, but both are motivated by the same strategic question: who will control the infrastructure of programmable money?
Understanding Stablecoins and Tokenized Deposits
Traditional deposits and fiat-backed stablecoins share common promises of 24/7 settlement, atomic delivery-versus-payment, and smart-contract programmability. Despite similarities, their design principles vary. Tokenized deposits encase existing commercial-bank liabilities within a cryptographic shell; the token inherits deposit insurance, Basel capital, and lender-of-last-resort support. In contrast, stablecoins are obligations of a non-bank issuer, circulate on public chains, and are secured by segregated reserves—typically short-dated Treasuries. Regulators generally prefer the first approach due to its safeguards, while markets currently favor the second for its unrestricted liquidity.
Active Players
Evidence of this divergence can be found in existing figures. J.P. Morgan's Kinexys (previously JPM Coin) surpassed $1.5 trillion in cumulative value this spring, following a tokenized Treasury ETF settlement against a deposit token on a public test-net. Meanwhile, Citi's Regulated Liability Network enables treasurers to move cash across borders without SWIFT hops. Tether's USDT surpassed $150 billion in market cap, Circle launched a nine-chain Circle Payments Network, and PayPal's PYUSD secured a Coinbase listing. Stablecoin rails are already too liquid for treasurers to dismiss.
Regulation is shaping the landscape. The GENIUS Act, if passed, would require issuers to maintain segregated Treasuries and operate bankruptcy-remote trusts—a step toward banking without deposit insurance. Europe's MiCA caps daily turnover unless a coin issuer becomes an e-money institution, while MAS discusses a three-pillar world: retail CBDC, regulated stablecoins, and tokenized deposits. The Bank for International Settlements has convened seven central banks and 41 financial institutions for Project Agora, aiming to integrate tokenized deposits and wholesale CBDC onto a "unified ledger."
Economic Implications
Besides rules, economics plays a significant role. Stablecoin issuers keep the spread between T-bill yields and the zero interest they pay holders—Tether earned over $5 billion in profit during the first half of 2024. Banks profit from deposit tokens by selling compliance certainty and embedding programmable workflows that off-the-shelf stablecoins currently lack. Corporate treasurers are already splitting their stakes: deposit tokens for intra-bank liquidity; stablecoins for overseas transactions.
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In Practice
Real-world applications are multiplying. Under Project Guardian, MAS is examining smart contracts for instantaneous and risk-reduced SGD-USD swaps. Kinexys now supports conditional logic, releasing payment upon IoT sensor confirmation of delivery, while Circle's new network facilitates multinational payments on Solana, acquiring receipts on Stellar, and sweeping surplus to a regulated custodian in New York. Trade finance platforms are testing tokenized deposits as real-time collateral for letters-of-credit, and African fintech remitters are already settling payroll flows in USDC due to delays or de-risking with correspondent wires.
Despite advancements, technology can't outrun risk. Tokenized deposits could fragment if every bank launches on a different, privately-controlled chain with bespoke standards. Stablecoins are still vulnerable to run dynamics: USDC briefly de-pegged during the 2023 Silicon Valley Bank panic, and the SEC hints that large coins might be unregistered money-market funds. Both sides have capital issues too. If Basel weights tokenized liabilities more heavily, issuance could stall; if Treasury yields decline, the stablecoin profit engine shrinks.
Future Prospects
BIS expects limited-scale Agora pilots by early 2026, J.P. Morgan plans to open Kinexys to third-party banks later this year, and Circle is advocating for U.S. regulators to classify USDC as cash equivalents. The contest is about reach: can banks persuade treasurers that compliant tokens will be just as liquid as public-chain dollars before stablecoins penetrate deeper into corporate workflows?
The rewards are significant: McKinsey puts annual cross-border friction at $120 billion. Trim even a third, and the savings rival the revenue of a top-ten global bank. This isn't a battle between VHS and Betamax; it's more like Wi-Fi and Ethernet—competing, interoperable, and gradually disappearing from end-users' awareness, with evolving standards rather than a single victor determining the winner. Whether banks or fintech issuers capture the lion's share depends on who can scale liquidity, satisfy regulators, and embed programmable dollars into everyday commerce first. The silent war for the money pipes has begun, and while consumers may never see or feel the plumbing, the savings or losses will flow directly through corporate balance sheets.
In Southeast Asia and the Asia Pacific region, financial institutions are actively exploring tokenized deposits and stablecoins as part of their business strategies. For instance, the Monetary Authority of Singapore (MAS) has expanded its Project Guardian pilot to include DBS, HSBC, and Standard Chartered, allowing them to issue on-chain versions of customer deposits for foreign-exchange and repo trades. On the other hand, stablecoin issuers like Tether and Circle are gaining traction due to their unrestricted liquidity, with Tether's USDT surpassing $150 billion in market cap.
As these new financial instruments continue to evolve, regulatory bodies like the Bank for International Settlements (BIS) and the United States Senate are stepping in to shape the landscape. The BIS's Project Agora aims to integrate tokenized deposits and wholesale CBDC onto a "unified ledger," while the GENIUS Act, if passed, would require stablecoin issuers to maintain segregated reserves and operate bankruptcy-remote trusts, a step towards banking without deposit insurance. The future of finance in this sector will be determined by who can successfully embed programmable dollars into everyday commerce while satisfying regulators and scaling liquidity.
