Tokenized deposits vs stablecoins: which pays interest?

Tokenized bank deposits can pay interest because the law still treats them as deposits, payment stablecoins can't pay interest from the issuer in the US or the EU, and tokenized money market funds pass through the yield of the Treasury bills they hold.

Tokenized deposits are bank deposits recorded on a blockchain, and they keep the legal form of a deposit, so a bank can pay interest on them the same way it pays interest on a business account. Payment stablecoins are the opposite case. The GENIUS Act in the US and MiCA in the EU both bar the issuer from paying holders interest, which is why USDC and USDT holders earn nothing from Circle or Tether directly. A third instrument, the tokenized money market fund, pays the fund's yield to every holder because it's a security, and on 24 September 2026 the average 7-day yield across tokenized Treasury funds was 3.52%, according to rwa.xyz.

Which instrument fits depends on the job. Tokenized deposits are ordinary bank deposits recorded on a blockchain, used mainly to move a company's cash around the clock between accounts and counterparties at the same bank, stablecoins move freely across public blockchains and DeFi, and tokenized funds are where institutions park cash they want to earn on. The sections below cover the legal basis for each interest answer, a dated tracker of live bank programs, and how a stablecoin holder earns a return when the issuer can't pay one.

What are tokenized deposits?

A tokenized deposit is a claim on a commercial bank, recorded as a token instead of an entry in the bank's core ledger. Each token equals one dollar held at that bank, and the balance stays on the bank's balance sheet, supervised like any other deposit. Brookings notes that tokenized deposits are covered by deposit insurance up to the $250,000 statutory limit, and the issuing bank can borrow from the Federal Reserve's discount window, which a stablecoin issuer can't.

The terms "tokenized deposit" and "deposit token" are often used as synonyms, though Brookings draws a line between them. A tokenized bank deposit is a digital representation of an existing deposit, with transactions authorized by the bank and settled on its own systems. A deposit token is native to the blockchain and settles there, and could in principle move between banks that share a common standard. JPMorgan's JPMD, which runs on the public Base network, is the best-known deposit token; most other bank programs are tokenized deposits on private, permissioned ledgers.

What is the difference between tokenized deposits and stablecoins?

The core difference is who stands behind the token. A tokenized deposit is a liability of a regulated bank that lends out part of its deposits, while a payment stablecoin is a liability of an issuer that must hold 1-to-1 reserves in cash and short-term government debt and can't make loans. Tokenized money market funds sit in a third category: each token is a share in a fund that owns Treasury bills and repo.

Status as of 24 September 2026. The first six rows follow Brookings' April 2026 comparison; the interest row and fund column are drawn from the statutes and fund documents cited below.

Which one pays interest, and why?

The answer comes straight from how each instrument is defined in law. The GENIUS Act, signed in July 2025, defines a payment stablecoin in Section 2(22) and then carves two things out of that definition: anything that "is a deposit... including a deposit recorded using distributed ledger technology", and anything that is a security under the Securities Act, the Exchange Act or the Investment Company Act (Pub. L. 119-27). Only the instruments left inside the definition are caught by Section 4(a)(11), which says no permitted issuer "shall pay the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention" of the coin.

• Tokenized deposits: excluded from the GENIUS definition, so the interest ban doesn't reach them. US banks have been free to pay interest on business checking accounts since the Federal Reserve repealed Regulation Q's prohibition on 21 July 2011 (Federal Reserve). JPMorgan described JPMD at launch as "providing the ability to pay interest to holders". Whether a given bank actually pays, and at what rate, is set in its client agreements, and none of the programs in the tracker below publishes a rate.
• Payment stablecoins: any yield a holder sees comes from a third party, because the issuer is barred from paying it, such as an exchange sharing reserve income as "rewards" or a lending market paying borrowers' interest. Banks have lobbied to close the exchange route, covered in our explainer on how the GENIUS Act and CLARITY Act reshape stablecoin yield.
• Tokenized money market funds: excluded as securities, and a fund exists to pass its income through. BUIDL accrues dividends each calendar day and pays them the next business day as new tokens (Securitize). Franklin Templeton's FOBXX, the fund behind BENJI, declares dividends daily and showed a 7-day yield of 3.67% on 22 September 2026 (Franklin Templeton).

The EU reaches the same split through MiCA. Article 2(4) excludes deposits and financial instruments from MiCA's scope, and Article 50 states that issuers of e-money tokens "shall not grant interest in relation to e-money tokens", extending the ban to crypto-asset service providers and treating any benefit tied to holding time as interest (Regulation (EU) 2023/1114). The reading that a bank-issued tokenized deposit sits outside both bans is ours, based on the statutory text; neither regulator has issued guidance on a specific deposit token.

Can you give an example of a tokenized deposit?

JPMorgan's JPM Coin is the most cited example, and five other large banks run or have announced programs. All of them serve corporate and institutional clients; none is open to retail customers.

Sources: JPMorgan, Citi, HSBC, CoinDesk on BNY, Wells Fargo, CoinDesk on the shared network. Checked 24 September 2026.

Scale is hard to pin down because banks don't publish token balances. Brookings estimated in April 2026 that JPMorgan's blockchain deposit business, including its private-ledger accounts, handles more than $7 billion a day.

Will bank deposit tokens compete with USDC?

For now they serve different users. Stablecoin supply stood at $312.8 billion on 24 September 2026, with USDT at $183.5 billion and USDC at $75.3 billion (DefiLlama). They're bearer instruments, so anyone with a wallet can hold them, trade them or post them as collateral in a lending market. Tokenized deposits move only between a bank's approved clients, so a JPMD holder can pay another JPMorgan client instantly on a Sunday but can't send JPMD to an arbitrary wallet or deposit it into a DeFi protocol.

The overlap is corporate cross-border payments, where Brookings reports that corporations interested in stablecoins "strongly prefer" to reach them through existing bank relationships. That preference is the banks' strongest card, and the shared Clearing House network is an attempt to fix their weakest one: tokenized deposits at different banks can't yet settle with each other onchain. US commercial banks hold about $19 trillion of deposits against roughly $0.3 trillion of stablecoins, so even a small shift in how that money moves would be large in stablecoin terms.

Which one should a treasurer or fintech hold for which job?

Each instrument answers a different operational need, and many treasuries will end up holding more than one.

What challenges do tokenized deposits face?

Nacha lists four challenges:

• Regulatory clarity: rules differ across jurisdictions.
• Interoperability: tokens need to move between institutions and chains.
• Operational and cybersecurity risk: including how banks manage the keys.
• Value proposition: customers need a clear reason to switch.

Interoperability is the binding one today. Brookings notes that interbank settlement of tokenized deposits held on private blockchains doesn't exist yet, which leaves each program as a closed loop for one bank's clients.

Two further limits matter for anyone comparing yields. Deposit insurance covers only the first $250,000 per depositor per bank, so a corporate balance in the millions carries bank credit risk on the rest, much as an ordinary deposit does. The rate a bank pays on a tokenized deposit is set by its business-account pricing, which it doesn't publish for these programs.

Where stablecoin holders earn a return instead

Because the issuer can't pay, a stablecoin's return has to come from deploying it somewhere: a lending market, a tokenized Treasury fund held inside a vault, or a curated strategy. Onchain vaults package that deployment into one token that tracks the position's value. Upshift is one provider, running more than 50 vaults across more than 30 chains that have been through 10 smart contract audits by 6 independent firms, and its frontend runs KYC and AML checks.

A vault return is variable and carries risks a deposit doesn't, including smart contract risk, the credit and liquidity risk of the underlying strategy, and the stablecoin's own peg. The routes and their trade-offs are laid out in how to earn yield on stablecoins in 2026. Always make sure to do your own research and be aware of the above and any other risks before depositing.

Frequently asked questions

Do tokenized deposits pay interest?

They can. A tokenized deposit is legally a bank deposit, so the GENIUS Act's interest ban doesn't apply, and JPMorgan built JPMD with the ability to pay interest. The rate depends on each bank's client terms, and no program publishes one.

Why can't stablecoins pay interest?

Section 4(a)(11) of the GENIUS Act bars permitted issuers from paying holders "any form of interest or yield" for holding the coin, and MiCA Article 50 does the same for e-money tokens in the EU. Banks had argued during the debate that interest-paying stablecoins would pull deposits away from lending.

Are tokenized deposits FDIC insured?

Tokenized deposits at a US bank carry the same FDIC coverage as the underlying deposit, up to $250,000 per depositor per bank. Deposits held at a bank's non-US branches aren't FDIC insured, as Wells Fargo's own release notes.

Is JPM Coin a stablecoin?

No. JPM Coin (JPMD) is a deposit token: a claim on JPMorgan Chase Bank recorded on the Base blockchain and available only to approved institutional clients. It falls outside the GENIUS Act's stablecoin definition because it's a deposit.

What is the difference between a tokenized deposit and a tokenized money market fund?

A tokenized deposit is a claim on a bank, while a tokenized money market fund is a share in a fund that owns Treasury bills and repo. The fund pays its portfolio yield to holders daily, but it's a security, so access is limited to eligible investors and its value can fall if the portfolio does.

Which banks offer tokenized deposits?

JPMorgan, Citi, HSBC and BNY run live programs for institutional clients, Wells Fargo is launching this fall, and JPMorgan, Bank of America, Citi and Wells Fargo plan a shared network for the first half of 2027.

Keep reading

• Tokenized treasuries. How BUIDL, BENJI and other Treasury funds work onchain.
• CBDC vs stablecoin. The central bank alternative and where it stands.
• How companies earn yield on treasury cash. The structures corporate treasurers use today.