Tokenized deposits are emerging as a practical way for banks and credit unions to combine the trust of traditional deposits with the efficiency of blockchain. Few know that better than Shawn Main, chief business architect for Vantage Bank Texas, a $4.9 billion subsidiary of VBT Financial Corp. headquartered in San Antonio. Main and his team have been pioneers in this space, testing three tokenized deposit initiatives in 2025, and developing a consortium named the Hazel Network to give community banks access to the technology in a structured way. He says it can be difficult for financial institutions to try and adopt tokenized deposits on their own. “What we’re putting together is not just the technology stack but the regulatory frameworks, all the risk frameworks and everything that these banks need so that they can more quickly adopt this technology and really start to leverage it,” he says.
Main recently joined Christopher Williston VI, CEO of the Independent Bankers Association of Texas (IBAT), and Nathan Ross, vice president of policy for the Conference of State Banking Supervisors, for a FinXTech webinar on how banks are using tokenized deposits. Greg Neumann, banking and fintech editor for FinXTech, moderated a discussion that focused on how these digital assets differ from stablecoins, why they are key to keeping deposits in traditional financial institutions, and why everyone is waiting on regulators to provide clarity on their use.
The interview has been edited for brevity, clarity and flow.
FXT: For those who might be brand-new to this topic, can you explain the key differences between tokenized deposits and stablecoins?
Main: I always think of stablecoins as a digital cashier’s check. So, in the same way that we issue cashier’s checks to send those funds to another bank, and then to settle and redeem those cashier’s checks, stablecoins operate much the same way. If you look at a tokenized deposit, it is a bank liability. All we’re doing is recording this on a different ledger, in this case the blockchain, and instead of on our core, we’re putting that on the blockchain itself, and it really represents the exact same thing that we have today across all our cores, all our banks. It’s a deposit. We just use the technology in a different way.
FXT: Shawn, I know you personally feel that the adoption of tokenized deposits is especially important to the future of community banking. Explain that.
Main: If you look at the market supply today of stablecoins, that’s somewhere north of $300 billion. That’s 1.5% of deposits that have left the community bank and financial system as a whole. Tokenized deposits, on the other hand, being that they live on each bank’s balance sheet, represent the liabilities for that bank. That means that those deposits stay in the local community and stay at that institution. And our main goal is making sure that tokenized deposits do get out there first. We think it’s important that stablecoins do not dominate the market. We think that will create credit issues for banks across the board as well as balance sheet issues.
FXT: Many bankers might say they don’t have a use case for tokenized deposits today. Do they need to look beyond that?
Williston: What Congress has done with the GENIUS Act is create an alternative financial services system, giving nonbanks a lot of the things that we’ve had — rails for payments and a ledger to keep track of whose money is whose. At the end of the day, if GENIUS sets up an alternative financial services system, it means that ultimately the next wave of financial innovation as a whole is going to happen, maybe not in existing financial institutions, but on the blockchain or on these other more novel resources. We simply can’t find ourselves in the place where we are not able to participate in that next wave of financial innovation.
FXT: Along with Vantage Bank’s Hazel Network, IBAT is starting its own tokenized deposit consortium. Why?
Williston: We heard from so many of our banks over the last year, just as Shawn has. They’re just trying to figure out where to start. “Where do we begin? How do we start to get our arms around this?” You’ve got the technology implementation piece of putting the technology together to participate in this. You also have that other thing that bankers always have to be aware of, that regulatory compliance, risk management, governance, all the stuff that banks are going to have to do simultaneously to build their own safe passage to participate in these technologies. We’ve got banks all over the state and now some in other parts of the country saying, “We want to be part of this process of figuring out what the technology is, and participating in and investing in the tools and resources that we’re going to need to be able to do this with a compliance-first mindset.”
FXT: Nathan, what are you asking of federal regulators on how they treat tokenized deposits?
Ross: We’re not asking for new rules related to tokenized deposits, but clarification, supervisory considerations around how existing rules or examiners may apply these standards to this next iteration of deposits. There are questions around smart contracts. Regulators are going to want to look at those and know what the flow is there and [that] protections are there. Liquidity considerations, third-party risk management, there’s quite a bit for the regulators to provide a little bit more guidance [on], and we are starting to see that.
FXT: Five big regional banks recently announced they are building their own tokenized deposit network. If we’re having all these different consortiums, how do they all connect eventually?
Main: We’re all going to have to be friends. There’s probably going to be a few networks regardless that spawn out of this, and it’s not unlike how the original clearing houses all started as separate independent clearing houses, and then they eventually consolidated. We’re reliving that same history right now, just in a different form of this technology.
Williston: Another example would be the segmented ATM networks that existed for years and then ended up consolidating over time. We’ve got lots of examples of fragmentation in industries that consolidated over time and became what we know today.
FXT: How do you hope bankers are utilizing tokenized deposits five years from now?
Ross: They’ve been able to experiment, and they’ve been able to develop and build and let the market decide where it’s going to go. Whether it’s several different networks, whether they’ve all combined some great network, there’s been regulatory and supervisory hand-holding to make sure these are done in a responsible and transparent way with customers, consumers, the industry. I think that’s a win.
Main: This is our opportunity as community and regional banks to take back control of our payment networks. And I hope that in five years everyone’s talking about how great this community bank network is, and that it is not dominated by the large[st] of the large.
To watch the full conversation, access the webinar recording here.
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