Tokenized Deposits Hit $4T, Outpacing Stablecoin Volume

A McKinsey & Company report published May 21 (UTC) drops a number that should reframe how crypto traders and institutional allocators think about onchain money. Large banks’ tokenized deposit systems now move an estimated $4 trillion annually, dwarfing the roughly $400 billion in organic stablecoin payment activity recorded in 2025. The report argues that the most systemically significant adoption of blockchain-based money is happening inside regulated bank rails, not on public stablecoin networks.

The finding challenges a core assumption in crypto markets: that stablecoins will become the default base settlement asset for tokenized finance. If McKinsey’s data is right, the real battle for onchain money is already being fought on bank balance sheets, and the outcome will determine which layer of the monetary stack controls institutional flows.

McKinsey Data: Tokenized Deposits at $4T vs Stablecoins at $400B

The report estimates total stablecoin supply at just above $300 billion as of early 2026, with roughly 99% denominated in U.S. dollars and about 85% issued by Circle and Tether. Supply has been broadly flat over the past six months, even as tokenized non-cash assets – onchain Treasury funds and private credit – grew by more than 30% in value in the same period.

Meanwhile, large banks scaled tokenized deposit systems that McKinsey estimates move more than $4 trillion per year. That is an order of magnitude larger than stablecoin organic payment volume. J.P. Morgan’s Kinexys platform alone processes more than $1 trillion per year in tokenized deposit transfers, supporting internal treasury movements, payments between affiliated entities, and institutional settlement. Citibank and BNY have disclosed live or pilot tokenized deposit initiatives.

The mechanism driving the shift

The difference is not technical; it is balance-sheet deep. When a customer converts bank deposits into a third-party stablecoin, the deposit liability leaves the originating bank. McKinsey suggests only about 15% of that value flows back into the banking system via wholesale reserves. The remainder is invested off balance sheet in assets such as U.S. Treasuries, shifting economic value to the stablecoin issuer.

Balance Sheet Incentive: Why Banks Favor Tokenized Deposits

Tokenized deposits keep the full amount on the bank’s balance sheet. The bank represents an existing deposit liability on blockchain rails – preserving the legal, regulatory, and accounting framework of deposits while adding programmable features like atomic exchange and streamlined reconciliation. Stablecoins, by contrast, create a new private currency outside the bank’s perimeter.

McKinsey also points out that regulation may tilt the playing field. Stablecoin regimes such as the EU’s MiCA framework and proposed U.S. GENIUS Act impose clear rules on licensing, reserves, and consumer protection, often restricting features like yield distribution to holders. That limitation reduces appeal for yield-sensitive corporates managing large cash balances. Tokenized deposits, as long as they remain on balance sheet, fall under existing bank regulation and can offer interest more freely.

Three-Layer Money Stack: Where Each Form Wins

McKinsey describes a three-layer onchain money architecture rather than a winner-take-all outcome:

• Stablecoins – “money in motion.” Optimized for rapid cross-border transfers and automated payment processing, especially where access to traditional banking is limited.
• Tokenized bank deposits – “money at rest.” Designed for large-scale corporate balances, institutional payments, and bank-to-bank settlement within the regulated banking perimeter.
• Tokenized central bank money (CBDCs) – “settlement money.” Intended to remove counterparty risk and provide irrevocable finality for high-integrity settlement, potentially across borders.

Each layer serves a distinct function. The question for market participants is not which technology wins, which institutions control each layer’s rails.

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