Distributed Ledger Architecture for Tokenized Deposits and Programmable Bank Money

Abstract

The rapid evolution of digital finance has highlighted the limitations of traditional deposit systems, which rely on siloed infrastructures, delayed settlement cycles, and limited programmability. Tokenized deposits—digital representations of commercial bank money issued on distributed ledger technology (DLT)—offer a transformative path forward by combining the regulatory assurances of bank-issued liabilities with the efficiency, transparency, and automation capabilities of decentralized platforms. This paper presents a comprehensive architectural framework for implementing tokenized deposits and programmable bank money using a permissioned distributed ledger. The proposed architecture integrates four core layers: a decentralized identity layer for KYC/AML compliance, a tokenization engine for minting and redeeming deposit tokens, a ledger layer for consensus and secure transaction finality, and a programmable smart contract layer for automated payment logic and compliance enforcement.
By introducing programmability into bank money, the framework enables conditional payments, escrow automation, real-time treasury operations, and machine-executable compliance checks that significantly reduce operational complexity and settlement risk. The architecture also supports cross-institution interoperability through standardized interfaces, improving efficiency in multi-bank payment scenarios while maintaining regulatory oversight via observer nodes and immutable audit logs. The paper evaluates security, scalability, and interoperability considerations and contrasts traditional deposit processes with tokenized lifecycle workflows, demonstrating substantial improvements in speed, transparency, and automation.
Overall, this work provides a foundational blueprint for U.S. and global financial institutions exploring the next generation of digital bank money. It bridges the gap between regulated banking environments and programmable financial ecosystems, offering a secure, compliant, and highly extensible model capable of supporting future innovations in retail payments, wholesale settlement, and institutional finance.