Banks plan services to profit from digital currencies

Banks are developing custody, settlement, issuance and platform services for central bank digital currencies (CBDCs), regulated stablecoins and tokenized assets to generate fees, interest and other service revenue. Financial firms are investing in distributed ledger technology, partnerships and new product lines to support those offerings.

For retail and wholesale CBDCs, banks expect to act as intermediaries while central banks keep issuance. Banks plan to provide wallets, identity checks, compliance screening and customer-facing services. They are also building custody and settlement systems for tokenized securities and corporate cash with the aim of charging custody fees, transaction fees and earning short-term interest on balances they manage.

On private digital currencies, some banks are considering issuing or sponsoring regulated stablecoins or offering minting and redemption services. Those activities would create fee income and give banks balance-sheet utility if regulators permit them to hold or manage such tokens.

Several institutions are running pilots that link existing payment rails to distributed ledgers to speed cross-border transfers and reduce reconciliation. Banks say they can offer faster, lower-cost international payments to corporate clients by using tokenized fiat or wholesale CBDC rails to settle transactions in near real time. Ancillary services under development include liquidity provision, intraday credit and foreign-exchange hedging tied to tokenized flows.

Revenue models being tested include transaction fees, subscription or platform fees for access to tokenization marketplaces, margin on treasury services tied to digital cash holdings, and custody and reporting fees for institutional clients. Banks are also exploring ways to provide analytics and fraud-detection tools from digital payment data, subject to data-protection rules.

Regulation and compliance are central to product design. Banks are preparing to apply anti-money-laundering and know-your-customer checks to digital wallets and token flows and to add transaction monitoring into new rails. Uncertainty about how authorities will treat stablecoins and private digital issuers is delaying large-scale commercial launches in some markets.

Technology choices affect business models. Some banks prefer permissioned ledgers to control access and privacy for institutional use cases, while others are testing token standards that can interoperate with public blockchains to reach broader markets. Integrations with legacy core banking systems and real-time settlement engines are required for firms that plan to operate retail CBDC wallets or tokenized deposit accounts.

Non-bank payment firms and crypto-native companies have developed wallet and custody capabilities, prompting banks to partner with or acquire specialists. Banks point to existing client relationships, regulatory licenses and balance-sheet capacity as reasons clients may prefer regulated institutions for custody and related services.

Operational and risk considerations include cyber security, operational resilience and liquidity management for tokenized payment systems. Banks are assessing how tokenized deposits or CBDC-related flows could affect deposit stability, intraday liquidity needs and capital treatment under current banking rules.

Central bank timelines for CBDC rollouts vary by country. Where retail pilots are advanced, banks are preparing distribution and customer-facing services. Where authorities have not decided on a retail CBDC, banks are focusing on wholesale settlement, custody and tokenization for institutional clients.

Central banks and private firms have accelerated research and pilots for digital money in recent years. Banks are building platforms and partnerships and seeking regulatory clarity to convert those capabilities into fee, interest and service revenues while managing compliance, operational and liquidity risks.