HSBC, Lloyds and JPMorgan are all working on tokenized deposits on the Canton network, and Digital Asset Chief Product Officer Bernhard Elsner explains why this product is structurally different from stablecoins and how Canton’s architecture eliminates bridging risk, rather than just managing it.
The tokenized deposit market is accelerating. HSBC has completed a pilot simulating the issuance of tokenized deposit services and atomic payments on the Canton Network. Lloyds Bank issued tokenized pound deposits to Canton, which they used to purchase tokenized gold coins from Archax. JPMorgan’s Kinexys division plans to bring JPM Coin natively to Canton in a phased integration throughout 2026. Canton Network founder Digital Asset is behind all three deals. As reported by crypto.news, Canton Network is positioning the network as the only public Layer 1 blockchain built for institutional investors, combining configurable privacy, atomic configurability, and regulatory compliance in a single infrastructure layer.
With the introduction of cantonal networks of tokenized deposits, a key question arises: How are these different from stablecoins?
Bernhard Elsner, chief product officer at Digital Asset, told crypto.news that this difference is fundamental and feeds into all other factors regarding how financial products work. “Tokenized deposits are digital representations of commercial bank deposits on a blockchain or other DLT platform. Unlike many other digital assets, these tokens are the bank’s own liability to the holder and have the same legal status as pounds or dollars in a traditional deposit account,” Elsner said. In contrast, stablecoin holders are creditors of private issuers with access to a pool of reserve assets. Wrapped asset holders rely on the integrity of the wrapper agreement as well as the custody arrangements behind it. Tokenized deposit holders are depositors and are subject to capital requirements, supervisory oversight, KYC and AML inherited from banks, and in most jurisdictions, deposit insurance. “For institutional money management, that’s the difference between a financial product where you can park your working capital and a financial product that you can only go through,” Elsner said. DTCC has already chosen Canton to tokenize U.S. Treasury securities, which Elsner describes as turning tokenized deposits into a natural cash leg, enabling true atomic transfers and disbursements between regulated assets and regulated bank funds.
Tokenized deposits and stablecoins are complementary, not competing
The difference between the two measures does not mean that they are antagonistic. Mr. Elsner is frank on this point. Stablecoins optimize reach and liquidity, while tokenized deposits optimize balance sheet integrity and regulatory certainty. “While these assets have different trade-offs, it is important to remember that they are complementary to each other,” he said. “We expect tokenized deposits to be leveraged alongside stablecoins and other digital assets as institutions decide which workflows they fit into.” Canton’s privacy and native composability enable this coexistence at the infrastructure level. In cantons, tokenized deposits act as direct regulated bank debt. This means it is not a wrapped claim, a deed of borrowing, or a separate bearer deed. It never leaves the legal and operational framework in which it was published. This gives financial institutions the confidence to use it for working capital rather than just for routing. As tracked by crypto.news, JPMorgan’s Naveen Marella describes deposit tokens as a “practical, high-yield alternative” for institutions seeking speed and security without leaving the banking system, characteristics that align exactly with what Elsner describes as the financial product’s institutional value proposition.
How cantons are eliminating bridge risks rather than managing them
The question of interoperability is where Canton’s architecture makes the most commercially significant case. Elsner sees the lack of interoperability not as a technical inconvenience, but as a structural barrier to meaningful scale. “Interoperability is absolutely critical to institutional adoption; otherwise these assets will remain trapped in fragmented silos and unable to reach meaningful scale,” he said. “Assets that cannot be moved beyond their native platform cannot be funded, reused, or integrated into broader financial workflows.” According to Elsner, most current DvP implementations do not achieve true atomicity. This is because settlements typically rely on intermediaries, pre-funding, or sequential processes between systems, which introduce delays and residual risks. With Canton, the securities leg and the cash leg can be settled in a single atomic transaction across two different applications, with no bridges in between. “Payment risk is not managed. It is eliminated at the infrastructure level,” Elsner said. HSBC’s pilot demonstrated just this, simulating the atomic settlement of tokenized deposits against other digital assets without the token ever leaving the issuing institution’s framework. As documented by crypto.news, Canton will process over $350 billion of tokenized value every day in 2026, and DTCC, LSEG digital payments house, and now JPMorgan have all selected it as their primary payments infrastructure.
Elsner said he expects tokenized deposits and stablecoins to continue to augment each other as differences in institutional workflows determine which financial product trade-offs are better suited.
