Major U.S. Banks Plan Shared Tokenized Deposit Network: According to the Wall Street Journal, several of the largest U.S. banks, including JPMorgan Chase, Bank of America and Citigroup, are planning to launch a shared tokenized deposit network. Internally, the banks reportedly refer to the network as either “the bridge” or “the chain”. It is planned for launch in the second half of 2027.
Tokenized deposits are similar to stablecoins in that they represent traditional currencies issued on blockchains such as Ethereum. The difference is effectively where the underlying money sits. Tokenized deposits represent customer money held at a bank. Stablecoins are typically backed by funds held with the issuer, which often invests those funds in short-term government bonds.
The banks’ tokenized deposit network is reportedly intended to keep deposits within the banking system while giving them blockchain-like functionality. This could help banks reduce the risk of deposit flight to stablecoins that can be used onchain, meaning directly on blockchain networks. We still need more detail on how the network will work, and which blockchains it may use. Still, the plan indicates that major banks are taking a positive approach to crypto.
Zcash Drops Substantially After Severe Bug Disclosure: Zcash, the largest privacy-focused cryptocurrency by market capitalization, had an extremely difficult week. Its market capitalization was about $8.7 billion when researchers announced a previously undisclosed severe bug in its code on Wednesday evening. The flaw could have allowed an attacker to mint unlimited Zcash tokens without anyone noticing.
The bug had been present in Zcash's code since May 2022. It was discovered on May 29, and a fix was implemented a few days later, on June 1. Because of the nature of the bug and Zcash's privacy features, no one knows whether it was actually exploited.
Zcash fell 25% on Thursday, shortly after the bug was made public, and a further 20% on Friday. It has since recovered some of those losses. Bugs of this severity are rare, but the episode highlights a core risk of cryptocurrencies: when something goes wrong in the code, the consequences can be substantial.
Strong U.S. Jobs Report Pressures Crypto: On Friday last week, the U.S. Bureau of Labor Statistics released the May jobs report. Nonfarm payrolls increased by 172,000, while hiring figures for both April and March were revised higher. Combined, the data showed that the U.S. labor market had its strongest three-month stretch in more than two years.
The strong labor market suggests that the Federal Reserve (Fed), the U.S. central bank, does not need to be overly concerned about employment. That reduces the case for cutting U.S. interest rates and increases the risk that rates stay higher, or potentially move higher. This comes after inflation rose following the energy shock, particularly the increase in gas and oil prices linked to the war in the Middle East, which has also reduced the chances of lower interest rates.
In general, higher interest rates are negative for digital assets. When safer investments offer higher returns, investors have less incentive to take risk in assets such as crypto.
