Stablecoins vs Tokenized Deposits: The Fight Over the Future of Digital Money
Stablecoin adoption is accelerating.
One of the world's most influential banking institutions is warning that the industry may be building the wrong type of digital money.
Bank for International Settlements General Manager Pablo Hernández de Cos argued this week that stablecoins are not a credible foundation for payments at scale.
His preferred alternative is tokenized commercial-bank deposits.
The disagreement goes far beyond crypto regulation.
It is a fight over who issues the money that moves across future blockchain-based financial networks.
What is a stablecoin?
A payment stablecoin such as USDC typically represents a redeemable claim issued by a specialized company.
The issuer holds reserve assets, often including Treasury securities, cash and bank deposits.
The token can then move across blockchain networks.
Its advantages are powerful:
- 24/7 settlement
- global transferability
- programmability
- open wallet access
That explains why stablecoins have grown far beyond crypto trading.
What is a tokenized deposit?
A tokenized deposit represents money already held inside a regulated commercial bank.
Instead of moving through conventional banking databases, the deposit is represented on programmable digital infrastructure.
Economically:
Stablecoin = claim on stablecoin issuer
Tokenized deposit = claim on commercial bank
The distinction sounds technical.
For the banking system, it is fundamental.
Why BIS prefers tokenized deposits
BIS argues that tokenized deposits preserve the existing monetary structure.
Commercial banks remain responsible for deposits.
Central-bank money continues serving as the settlement anchor.
Banks continue creating credit through the traditional banking system.
The BIS case against stablecoins at scale focuses on several problems:
- fragmented networks;
- inconsistent AML enforcement;
- monetary sovereignty concerns;
- interoperability problems;
- potential bank-deposit outflows.
The last issue matters economically.
If households move deposits out of banks and into stablecoins, banks may lose cheap funding.
That could force them to pay more for funding and potentially charge more for loans.
The crypto counterargument
Stablecoin supporters see many of the same characteristics differently.
A stablecoin does not need to remain inside one bank.
It can move across exchanges, wallets, DeFi, merchants and countries.
That openness is the feature.
Tokenized deposits risk recreating the traditional banking system on new technology while retaining closed institutional boundaries.
The crypto argument is essentially:
Why tokenize old rails when digital money can be natively interoperable?
Banks are hedging their bets
What makes the debate particularly interesting is that banks are no longer simply rejecting stablecoins.
Some are considering issuing them.
BankChain Alliance is building shared blockchain infrastructure that could support both tokenized deposits and stablecoins.
Major global banks are also exploring digital-money structures.
This suggests the final outcome may not be one winner.
Banks may use:
tokenized deposits internally
and
stablecoins for external settlement.
Regulation is fragmenting globally
Rules in the U.S., EU, UK, Hong Kong and Singapore already differ in important ways.
Some jurisdictions tightly restrict what payment-stablecoin issuers can do.
Others allow additional activities with separate authorization.
That means “a regulated stablecoin” does not yet describe one globally consistent product.
For global payments, this fragmentation is a real problem.
Why it matters for Visa, Revolut and crypto exchanges
Stablecoins are rapidly becoming a distribution battle.
Visa is integrating them into payment systems.
Revolut has launched EURR.
Crypto exchanges use stablecoins as settlement assets.
Banks are building tokenized-money infrastructure.
Whoever wins control of digital cash gains an enormous strategic advantage.
Money is the base layer underneath trading, payments, lending, tokenized securities and AI commerce.
Risks on both sides
Stablecoins face:
- issuer risk;
- reserve risk;
- redemption risk;
- regulatory fragmentation.
Tokenized deposits face:
- bank credit risk;
- interoperability limits;
- closed-network design;
- cross-border complexity.
Neither model automatically solves digital money.
The real winner may be whichever becomes easiest to move between institutions.
What to watch next
The most important signals are:
- bank-issued stablecoins;
- BankChain architecture;
- Visa integrations;
- tokenized-deposit interoperability;
- stablecoin payment volume;
- global regulatory convergence.
The future may not be:
banks versus crypto.
It may be:
banks, fintechs and crypto firms competing to issue the programmable money everyone else builds on top of.
That is a much bigger fight.
FAQ
What is the difference between a stablecoin and tokenized deposit?
A stablecoin is generally a claim on a stablecoin issuer and its reserves. A tokenized deposit represents a bank deposit in digital-token form.
Why does BIS prefer tokenized deposits?
BIS argues they preserve the existing two-tier monetary system and reduce risks related to fragmentation and bank funding.
Are banks against stablecoins?
Not universally. Some banks are now exploring stablecoin issuance or infrastructure alongside tokenized deposits.
Which model will win?
It is too early to know. Both may coexist for different payment and settlement use cases.