Central banks have CBDCs, non-bank players from the crypto world have stablecoins. One may get the impression that banks have given up on the fight for a new standard of money in the digital world. However, a late start does not have to mean defeat, especially if you have significant advantages up your sleeve.
Operation 24 hours a day, 7 days a week, immediate irreversible settlement here and now, and the option of using algorithms that will allow money to be activated not only by human actions, but also based on smart contracts. Some form of decentralized ledger in the background. This is a brief description of the foundations of the “new digital money” that is being formed before our eyes.
To simplify slightly, we can say that today we encounter three types of money in the economy:
- Central bank money. An example may be cash in a wallet or entries in accounts with the National Bank of Poland, the ECB or another institution acting as a “bank of banks”.
- Money of commercial banks. These are entries in bank accounts that we activate with payment instruments, such as a card or BLIK.
- “Private” money that has purely payment functions and is created only by conversion from the two previous forms. An example is electronic money, within the meaning of European regulations. If we remember the beginnings of Revolut, when it offered interest-free “wallets” and not accounts, it may be an illustration of this category.
A new form of money of the first kind Is CBDCcentral bank digital money. For now, it only operates in a few countries, but dozens of banks around the world deal with it more or less seriously. A new form of money of the third type can be called modern, regulated
stablecoinsi.e. stable in relation to the selected official cryptocurrency currency (e.g. e-money tokens provided for by the EU MiCA regulation). But where is the “new” money of commercial banks in this puzzle? He definitely didn't gain as much notoriety as his companions. It's called tokenized deposit.
What is the difference between a stablecoin and a tokenized deposit?
Stablecoins and tokenized deposits (or deposit tokens) seem to have several common features, primarily resulting from similar technological foundations. They are intended primarily for making payments, without the delays typical of interbank settlement systems. Transferring a token is a clearing and settlement in one, taking place simultaneously, as when handing over a banknote.
Both stablecoins and tokenized deposits inherit the once unique features of unofficial cryptocurrencies – programmability and independence from the financial infrastructure of the previous era. However, this is where the similarities end.
Stablecoins are issued based on currency reserves, on a one-to-one basis. They therefore represent official money in the digital worldwhich in the “analog world” is stored separately from the issuer's assets, in the form of bank deposits, treasury bills or other safe assets.
Stokenized deposits are the official money of commercial banks in a new packaging. Deposits remaining on the bank's balance sheet receive the digital form of tokens, but inherit the features of their “analog” parent:
- They are subject to protection under the deposit protection systemin the event of bank failure.
- They may bear interestwhich is not allowed in the case of regulated stablecoins (e.g. MiCA in Europe or GENIUS Act in the United States).
A side effect of these differences is the impact on the liquidity of the banking sector. Stablecoins suck up funds and immobilize them, because at least part of the reserves underlying the issue go outside the banking sector. In the case of tokenized deposits, such an effect does not appear, and a supporter of the multiplier approach to describing the money creation process would say that “banks can use these funds to create loans.”
Banks can bet on both horses in the race
In recent months, there have been many reports of banks engaging in creating their own stablecoins, independently or in larger alliances. Such news comes from the USA, but also from Europe. At the same time, banking institutions, often the same ones, are working on deposit tokens in different formulas. Although stablecoins have gained much more publicity, nothing is certain yet. Especially since we are not dealing with a situation where one standard must win.
One possible scenario is the division of the market between digital bank money and private money. The former could become the preferred form of settlements and liquidity management (e.g. within large multi-branch corporations) for large enterprises. Wholesale transactions supported by banks are a less risky option for such a client than “private” tokens.
Stablecoins would have a chance to shine in P2P settlements, e-commerce, global remittances, and other more “retail” scenarios. Here, too, banks can play an important role as issuers, although they already have serious competitors in at least some parts of the world.
