Why Wall Street giants are building financial products for institutions rather than ordinary consumers

Lynq Network CEO Jerald David notes that the finance departments of large institutions now have to manage three systems at once for the same job: one customer using JPMorgan's token digital deposit, another using regulated stablecoin , and a third using traditional brokerage bank accounts. The purpose of moving funds is the same for all three, but the underlying infrastructure varies. This situation reveals the core contradiction facing banks in advancing their business with token : how they balance efficiency against compliance and privacy.

Fragmentation of liquidity drives up capital costs

David believes that the most unacceptable thing for institutional clients is to be locked into a separate liquidity pool on each network they access. He emphasizes that distributed idle liquidity across five networks results in capital efficiency losses equivalent to being stored centrally at one location five times over.

In other words, regardless of whether it is token or stablecoin , if each chain forms an isolated pool, institutions will have to reserve several times more capital for the same business size. This is why cross-network settlement efficiency has become a key bottleneck in institutional applications of blockchain .

Essential differences between token and stablecoin

Although token and stablecoin are both represented as on-chain in appearance, the legal nature is different: a deposit that remains an issuing bank's claim on it can be charged interest, stays within the regulated banking system, and may be settled by programming for assets with token .

The real question for banks is whether these benefits can be passed on to end customers while maintaining privacy, compliance and control over deposit holders.

Bhandari, the head of Monect said that Monument is unlike stablecoin , which has a banking license and can legally pay interest to depositors, and plans to launch an income-generating chemical savings account called token . This product offers new options beyond stablecoin for institutional clients seeking financial efficiency at on-chain who are reluctant to give up their interest income.

Privacy and cross-chain connectivity is the gateway to banking

Fahmi Syed, president of the Midnight Foundation poses another level challenge: public blockchain infrastructure is a natural barrier for banks because they cannot expose their customers' transaction data and business relationships.

Once you build a private chain, how does it communicate with another private chain? You have to use bridges or other mechanisms and at that point the data gets leaked.

This means that privacy-protecting technologies (such as zero-knowledge proof or private computing environments) and communication protocols such as cross-chain will directly determine whether deposits in the banking system can flow efficiently between multiple networks, rather than creating new liquidity islands.

What it means for the industry

For institutions, the choice of which tool depends on whether customers need billing, regulatory affiliation and cross-network liquidity requirements; for the industry as a whole, competition between revenue advantages brought by banking licenses and public blockchain 's open liquidity will determine the shape of the next generation on-chain settlement infrastructure. The future value of concern is whether bank products can come up with solutions that are both compliant and efficient in privacy technology interacting with cross-chain .