The clock, not the ledger: what a 24/7 deposit network costs 30 banks with $10T in assets

More than 30 banks with over $10 trillion in combined assets expect the Cari Network, a tokenized-deposit system, to be fully operational by the fourth quarter of this year ^[1]. The expensive part of that is not the distributed ledger, it is the disappearance of the close of business, the assumption sitting underneath most of the risk controls banks currently run ^[2].

A tokenized deposit is a claim on a deposit at a licensed depository institution, represented on a blockchain instead of the bank's internal ledger ^[3]. Because it moves on a distributed ledger, it can settle faster than traditional rails, particularly across borders, where currency conversion and differing regulatory regimes normally introduce delay ^[4]. Cari's named partners include KeyCorp, Huntington Bancshares, Old National Bancorp, First Horizon, M&T Bank and SouthState ^[5]. At more than 30 participants, the average balance sheet in the network is roughly $333 billion or less ^[6], which means this is not a fintech pilot population.

Matt McAfee, head of enterprise innovation and digital assets at M&T Bank, told American Banker the risks feel "familiar" in many ways but are "heightened in a world where customers can move money 24/7," and that tokenization requires banks to adapt payment flow monitoring and improve liquidity position forecasting ^[7]. That is the operational bill: intraday forecasting that has to be right at 3 a.m. on a Sunday, not just at cutoff. McAfee also noted M&T has not yet launched a blockchain payment product, and that its risk calculus may change once it does ^[8]. His summary of the timeline is worth keeping: "There's a lot of innovation here, but it's going to take years of thoughtful work, both from banks and the regulators that oversee us, to make sure we do this in an appropriate manner" ^[9].

Brian Mellone, executive vice president and director of enterprise data and strategy at First Horizon, said traditional payment controls must "adapt to the technology" ^[10]. He said the bank has examined whether tokenization changes the pace at which liquidity can move and therefore the potential for runs, but concluded runs are driven by the composition of a bank's customer base rather than the rail ^[11]. First Horizon's initial deployment is to existing commercial clients paying other commercial businesses, so Mellone said its risk profile is not changing ^[12]. His caveat is the one to file away: "If you materially change the composition of your customer base to follow a product, that has to be very much analyzed and contemplated, because then you've changed the risk profile of your institution, and the technology is the vehicle to then realize that risk" ^[13].

Tara Edmonds, senior vice president and enterprise payments strategy leader at SouthState Bank, pointed out that The Clearing House's RTP Network and FedNow already taught banks to operate 24/7/365, giving them a jumping-off point ^[14]. What is new is reconciliation across three environments at once: legacy core platforms, virtual ledger platforms and blockchain networks. "Having to reconcile three platforms is probably a newer concept for banks," Edmonds said, along with having controls in place for failures within that chain ^[15].

Watch whether the fourth-quarter date holds, and watch what the early volume actually is ^[1]. Commercial-to-commercial payments on existing client relationships are the cheapest possible version of this ^[12]. The cost curve turns when a participant extends tokenized deposits to a different customer base, because that is when the control gaps stop being theoretical ^[13].