Can your bank actually handle Tokenised Money - or just talk about it?

Banks have spent years watching the digital asset space with cautious curiosity. That luxury is gone. Stablecoins have crossed the line from speculative instrument to genuine payments infrastructure and the window for banks to define their role in that ecosystem is narrowing fast.

Risk of deposit flight

When customers move money into stablecoins, there is a potential that the funds used for buying stablecoins are not available for lending within banking system - either fully or partially. This will depend on the reserves used to back the purchased stablecoins (e.g., cash or treasuries) as required by the Genius Act in the US and MiCA regulation in Europe. At scale, this forces banks - particularly Tier-II and Tier-III institutions - into greater reliance on expensive wholesale funding just to maintain lending capacity. This is not a future risk. The trend is already underway, and it compounds quietly until it doesn’t. The Clarity Act in US will of course have some bearing on this, based on the final decision on whether the interest generated on reserves backing the stablecoins can be shared with investors via third-parties or other means.  
Cross-border payments are following the same trajectory. Stablecoins offer SMBs a faster, cheaper alternative to traditional correspondent banking. Those customers are not waiting for banks to catch up. They are already moving.

Losing on card payments

Here is the threat that rarely appears on risk registers: the card networks themselves. Visa and Mastercard are actively experimenting with stablecoin settlement. The rails may stay the same, but the currency running through them could change. If a meaningful share of card transactions eventually settles in stablecoins rather than fiat, the revenue and liquidity implications for banks are significant. Prepare now or scramble later.

The opportunity side is just as compelling

The threat narrative is real, but it is only half the picture. Banks that move with conviction have genuine opportunities to capture.

Stablecoin reserves. Every stablecoin needs reserves held somewhere. Banks can be that somewhere, though competition is tightening. In the US, stablecoin issuers pursuing national bank charters could end up holding their own reserves, cutting traditional banks out entirely. This window is open, but not permanently.

FX margin. Stablecoin issuers need foreign exchange. Banks with serious FX operations can serve that demand profitably and with rigorous compliance. The smarter play is closer to home: banks offering stablecoin wallets integrated with fiat accounts capture FX margin on every conversion. No new counterparty required.

Tokenised deposits. Banks that invest now in issuing their own tokens (tokenised deposits or deposit tokens) will be positioned to offer a genuinely differentiated cross-border payments experience. This is where the long-term revenue opportunity sits, and where early movers build the most durable advantage.

In both scenarios, where banks issue their own tokens or provide FX for issuing or redeeming of stablecoins, banks have a big advantage of being trusted in the market. This is due to the long-standing relationship between banks and their customers and banks being more regulated than other market players. If the business value proposition offered by banks is even equivalent to that offered by non-banks, banks can win based on their being the safest pair of hands.  

What banks must actually build

Strategy without architecture is just intention. The IMF’s ASAP framework — Access, Service, Asset, Platform, developed with the Monetary Authority of Singapore gives banks a practical model for organising their digital asset technology agenda. Please see reference to the paper at the end of this blog. Here is how it maps to the decisions banks face right now.

Platform layer: Integration capability matters more than blockchain choice

This foundational layer covers blockchain or DLT infrastructure, execution engines, ledgers, and authentication. The honest advice: the technology choice itself matters less than most banks assume. Permissioned networks and public chains, both are defensible depending on use case.

What is not defensible is choosing a platform that cannot integrate with existing core banking systems and traditional payment rails like SWIFT, RTGS, and Instant payment schemes. These systems still process the overwhelming majority of the world’s payments. A digital asset platform that cannot speak to them is not a solution; it is a silo.

One further signal: Stripe’s stablecoin orchestration capabilities show that non-bank payment players may build their own Layer-1 infrastructure entirely. The pressure on traditional rails is not just coming from crypto natives.

Security baseline: Enterprise-grade key management, e.g., Hardware Security Modules (HSMs), Multi-Signature Controls and Multi Party Computation (MPC) wallets, is non-negotiable from day one.

Asset layer: Get governance right before you scale

This is where tokenised deposits, deposit tokens, and stablecoins are formally defined: issuance rules, transfer functions, redemption mechanics, access controls. Tokenisation separates the asset issuer from the platform operator, i.e., a bank’s token can be governed independently of the infrastructure it runs on.

When following MiCA in Europe or the Genius and Clarity Acts in the US, banks with clean, well-governed Asset layer design will adapt far more easily than those who have conflated asset logic with platform logic. Design this layer with regulatory change in mind from the start.

Service layer: Where competitive advantage is actually built

The Service layer is the most strategically significant and the most underinvested. This is where financial services, payments, FX, lending, collateralisation, escrow are built on top of digital assets. The architectural decisions here define the bank’s entire digital asset proposition.

Stablecoins as the inter-chain settlement layer. If Bank A’s tokenised deposits run on one blockchain and Bank B’s on another, moving value between them is an interoperability problem. Stablecoins can act as the neutral clearing asset that bridges those networks, the digital equivalent of correspondent banking, but faster, cheaper, and programmable. Design for this from day one, not as a retrofit. Arguably, Central Bank Digital Currencies (CBDCs) can also act as the inter-chain layer as and when they are introduced in multiple jurisdictions.

The bridge to traditional rails. When a stablecoin payment settles against a fiat account, or a tokenised deposit interacts with an RTGS system, the Service layer is where that handoff happens. Get this right and customers experience seamless payments regardless of what runs underneath. Get it wrong and the seams show.

Compliance, i.e., on-chain transaction monitoring, Travel Rule adherence, counterparty screening also lives here. These must be modular and reusable, not bolted on. Banks should also be actively engaged with SWIFT’s blockchain experiments, BIS Project mBridge, and Partior, which are all working on exactly this standardisation challenge.

Access layer: Leverage what you already have

This is the customer-facing layer: wallets, mobile apps, API gateways, portals. Most banks have solid Open Banking foundations here. The immediate priority is simple, to have stablecoin wallets integrated natively with fiat accounts, so FX conversion margin stays within the bank.

Looking ahead: as card networks move toward stablecoin settlement, this layer will need to support 24/7 real-time settlement flows. Most bank treasury systems are not designed for this. That gap needs to be on the roadmap now.

Build vs. Partner: The ASAP model makes this clearer

Platform and Access layers are well-served by established providers. Compete on Asset and Service layers, these are where digital asset behaviour is defined, where interoperability is either achieved or lost, and where differentiation is genuinely possible. Own what differentiates you. Partner for everything else.

From architecture to operation: The orchestration gap

Understanding the four layers is necessary. But the hardest problem in digital asset implementation is not designing the architecture , it is making it work as a coherent whole, in production, across both digital and traditional infrastructure simultaneously.

This is the orchestration gap, and it is where most bank digital asset programmes stall between pilot and scale.

Icon Payment Framework (IPF) is built for exactly this problem. IPF provides end-to-end process orchestration for bank tokens, i.e., tokenised deposits and deposit tokens , as well as for stablecoins, operating at the Service layer complexity described above. These capabilities make it directly relevant to the challenges raised in this blog.

Infrastructure flexibility. IPF connects with whichever digital networks and wallets a bank selects. Platform layer choices remain open; banks are not locked into a single blockchain vendor as the ecosystem evolves.

Dual-rail payment routing. IPF routes transactions across traditional or digital rails based on bank preferences and customer agreements. This is the practical mechanism for managing the transition between legacy and emerging payment infrastructure without a disruptive hard cutover.

Fiat-to-token funding and defunding. IPF orchestrates the funding and defunding of bank tokens using fiat currency, the critical operational bridge between the Asset layer’s digital token world and the core banking systems where fiat balances are held.

Using IPF doesn’t mean that a bank has to rip and replace its existing payment solutions - read our blog or better still come and talk with us at Icon Solutions.

Reference: Budau, V., Tourpe, H. “ASAP: A conceptual model for Digital Asset Platforms”, IMF Working Paper No 24/19, International Monetary Fund, Washington, D.C. 2024.