Banks Strike Back: Five US Regional Lenders Build a Tokenized Deposit Network on ZKsync to Take On Stablecoins
Standard Chartered estimates US banks could lose $500 billion in deposits to stablecoins by 2028. Five regional lenders just decided they are not going to sit around and watch it happen.
In March 2026, Huntington Bancshares, First Horizon, M&T Bank, KeyCorp, and Old National Bancorp unveiled the Cari Network — a shared, blockchain-based platform that turns ordinary bank deposits into programmable digital tokens capable of settling instantly, around the clock, between institutions. The catch for stablecoin issuers like Circle and Tether: every dollar on Cari remains a fully regulated bank deposit, complete with FDIC insurance and balance-sheet treatment that stablecoins simply cannot match.
The $500 Billion Deposit Drain That Lit the Fuse
The urgency behind Cari is not theoretical. A January 2026 Standard Chartered report found that roughly one-third of the growing stablecoin market will be sourced from developed-market bank deposits, with US regional banks bearing the brunt. Unlike money-center giants with diversified revenue streams, regionals depend heavily on net interest margin — and when sticky retail deposits migrate to USDT or USDC, the hit goes straight to the bottom line.
The numbers tell the story. The stablecoin market now exceeds $300 billion. Tether and Circle hold most of their reserves in US Treasuries rather than redepositing at commercial banks, meaning every dollar that moves from a checking account into a stablecoin is a dollar permanently removed from the banking system's lending capacity.
On March 11, 2026, FDIC Chairman Travis Hill made the regulatory divide official: stablecoins will not receive any form of FDIC deposit insurance under the GENIUS Act framework. Tokenized deposits, by contrast, satisfy the statutory definition of a "deposit" under the Federal Deposit Insurance Act and are eligible for the same protections as traditional accounts — regardless of the technology used to record them.
For the five banks behind Cari, the message was clear: if you cannot beat stablecoins on speed, match them — while keeping the regulatory advantages that non-bank issuers can never access.
What Cari Network Actually Is
Cari was founded by Eugene Ludwig, the 27th Comptroller of the Currency under the Clinton administration and founder of Promontory Financial Group (later sold to IBM). Ludwig's regulatory pedigree is not incidental — it is the project's core thesis. Cari is built on the premise that tokenized bank deposits can offer everything stablecoins do — instant transfers, programmability, 24/7 availability — while preserving the legal and economic properties of regulated bank money.
The five founding design partners collectively manage approximately $779 billion in assets:
| Bank | Total Assets |
|---|---|
| Huntington Bancshares | $225 billion |
| M&T Bank | $214 billion |
| KeyCorp | $184 billion |
| First Horizon | $84 billion |
| Old National Bancorp | $72 billion |
How the Token Works
Cari employs a unified token design. Customers access the token through their existing bank relationships, but the token itself is fungible and indistinguishable between institutions. A central network operator manages token supply on behalf of all participating banks.
This is a critical design choice. Unlike JPMorgan's JPM Coin (now JPMD under the Kinexys brand), which originated as a single-bank instrument, Cari creates a shared interbank settlement layer from day one. When a Huntington customer sends a Cari token to an M&T Bank customer, the transfer settles instantly on-chain — no correspondent banking, no batch processing, no waiting until Monday morning.
Crucially, these tokens never leave the banking system. They remain direct liabilities of the issuing banks, sitting on the balance sheet and preserving the lending capacity that stablecoins strip away.
Why ZKsync's Prividium — and Why It Matters
For the blockchain infrastructure, Cari selected Prividium, a permissioned, privacy-preserving platform built by Matter Labs (the team behind ZKsync) and anchored to Ethereum.
The choice signals an important evolution in institutional blockchain strategy. Rather than building on a general-purpose public chain or spinning up a fully private ledger disconnected from the broader ecosystem, Prividium occupies a middle ground: private enough to satisfy bank compliance requirements, but cryptographically anchored to Ethereum's security guarantees through zero-knowledge proofs.
Key architectural features include:
- Permissioned access: Only approved participants — banks and their designated counterparties — can transact on the network
- Privacy by design: Transaction details are shielded from public view while remaining auditable by regulators
- Ethereum settlement: Final settlement proofs are posted to Ethereum mainnet, inheriting the security of the world's largest smart contract platform
- ZK-proof technology: Zero-knowledge proofs enable verification of transaction validity without exposing underlying data
This architecture directly addresses a tension that has plagued institutional blockchain adoption: banks need privacy and regulatory auditability, but they also need the trust guarantees that come from anchoring to a decentralized, battle-tested network.
Tokenized Deposits vs. Stablecoins: The Structural Divide
The competition between tokenized deposits and stablecoins is not just about technology — it is about fundamentally different monetary architectures.
Balance Sheet Treatment
When Circle issues USDC, it takes a customer's dollars, parks them in Treasuries and cash equivalents, and issues a new digital asset. That dollar leaves the banking system. The bank loses a deposit. The money multiplier contracts.
When a Cari bank issues a tokenized deposit, nothing leaves the balance sheet. The deposit is simply represented in a new format — programmable, instantly transferable, but still a bank liability supporting the institution's lending operations.
FDIC Insurance
The FDIC's March 2026 clarification drew a bright line. Tokenized deposits that meet the statutory definition of a deposit receive full FDIC insurance coverage — up to $250,000 per depositor, per institution. Stablecoins receive none.
For institutional treasurers managing millions in working capital, this distinction is not abstract. It is the difference between protected funds and an unsecured claim on a non-bank entity.
Interest-Bearing Capability
Stablecoins under the GENIUS Act framework face significant restrictions on offering yield to holders — a provision the banking lobby fought hard to preserve. Tokenized deposits face no such restriction. Banks can pay interest on tokenized deposits just as they do on traditional savings accounts, creating a compelling value proposition for both retail and institutional customers.
Credit Creation
Perhaps the most consequential difference operates at the macroeconomic level. Stablecoin reserves locked in Treasuries do not support new lending. Tokenized deposits, because they remain on the bank's balance sheet, continue to fuel the credit creation process that underpins the broader economy. This is why regulators and central bankers have consistently favored deposit-based tokenization over stablecoin alternatives.
The Competitive Landscape: JPM Coin, Regulated Liability Network, and Beyond
Cari does not operate in a vacuum. Several parallel efforts are racing to define how tokenized bank money will work.
JPMorgan's Kinexys (JPMD) is the most mature tokenized deposit product, processing billions in daily transfers since 2019. In 2026, JPMorgan expanded JPMD to Coinbase's Base network and the Canton Network, signaling a multi-chain strategy. But JPMD remains a single-bank instrument — useful for JPMorgan's own clients, not for interbank settlement between regional lenders.
The Regulated Liability Network (RLN) is a broader industry consortium exploring how commercial bank money, central bank money, and regulated non-bank digital money can coexist on shared infrastructure. Cari's multi-bank approach aligns philosophically with RLN's vision, though Cari is moving faster toward production.
USDF Consortium, backed by several community banks, is another tokenized deposit initiative — though it has moved more slowly and targets smaller institutions.
What distinguishes Cari is the combination of scale ($779 billion in combined assets), speed (Q3 2026 pilot, Q4 production), and infrastructure choice (Prividium's privacy-preserving architecture on ZKsync). The network is explicitly designed to grow: additional banks can join as participants without rebuilding infrastructure.
The Timeline: From MVP to Production in 2026
Cari's development roadmap is aggressive by banking standards:
- March 2026: Minimum viable product demonstration completed
- Q3 2026: Pilot program launch with participating banks testing real transactions
- Q4 2026: Full production availability for customers of all five founding banks
This timeline places Cari ahead of most competing bank-led tokenization efforts, which tend to remain in prolonged proof-of-concept phases. The involvement of a former Comptroller of the Currency as founder likely smooths regulatory conversations that slow down other projects.
What This Means for the Stablecoin Industry
Cari's emergence does not spell doom for stablecoins. USDT and USDC have established dominant positions in crypto-native ecosystems, cross-border remittances, and DeFi protocols — markets that bank-issued tokenized deposits are unlikely to penetrate in the near term.
But for the institutional and wholesale money markets that both stablecoins and banks covet — corporate treasury management, B2B payments, supply chain finance, real-time interbank settlement — tokenized deposits hold structural advantages that regulation is now codifying.
The FDIC's insurance distinction, the GENIUS Act's yield restrictions on stablecoins, and the OCC's favorable capital treatment for tokenized deposits all point in the same direction: the US regulatory framework is being designed to ensure that bank-issued digital money retains its privileged position.
For stablecoin issuers, the strategic response is already underway. Tether is establishing a US subsidiary for GENIUS Act compliance. Circle has positioned USDC as fully compliant from day one. But neither can offer FDIC insurance, and neither can support the credit creation process that regulators view as essential to economic stability.
The Bigger Picture: Who Controls Digital Money?
The Cari Network represents something larger than five banks tokenizing deposits. It is the banking system's opening move in a contest over who controls the infrastructure for digital money in the United States.
Stablecoins offered a vision where non-bank technology companies issue dollar-denominated tokens outside the traditional banking perimeter. Tokenized deposits offer a counter-vision where the banking system absorbs the technology — speed, programmability, 24/7 availability — without ceding control of the money supply.
With $500 billion in deposits potentially at stake, the outcome will shape how digital payments, settlement, and lending work for the next decade. The race between tokenized deposits and stablecoins is not winner-take-all — both will coexist. But the regulatory architecture being built in 2026 makes clear which side Washington is backing.
Five regional banks and a former Comptroller of the Currency are betting that the future of digital money runs through the banking system, not around it. With Cari Network launching on ZKsync's Prividium later this year, the market is about to find out if they are right.
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