Banks and international regulatory agencies are gradually prioritizing the issuance of digital currencies based on tokens representing bank deposits over stablecoins.
The model of tokenizing bank deposits is viewed as safer and retains existing financial protection measures, while stablecoins are still subject to strong regulation due to their volatility and value risk.
MAIN CONTENT
Tokenized bank deposits are prioritized by regulatory agencies over stablecoins due to their high reliability.
Non-transferable tokenized deposits maintain value and comply with regulations like traditional deposits.
Stablecoins remain popular due to their liquidity and flexible usability in the global cryptocurrency market.
What is tokenized bank deposits and why are they favored?
Information from JPMorgan led by Nikolaos Panigirtzoglou indicates that many countries are leaning towards the model of tokenized bank deposits rather than stablecoins. Tokenized deposits are the digital version of traditional bank deposits, stored and processed on the blockchain but still retaining full protections such as deposit insurance and compliance with KYC, AML.
According to Andrew Bailey, Governor of the Bank of England, he supports banks issuing tokenized deposits representing central bank deposits instead of privately issued stablecoins. This helps modernize the financial system and make it safer, minimizing risks compared to stablecoins.
Tokenized bank deposits are a safe technological advancement aimed at modernizing finance while ensuring important regulatory standards such as deposit insurance and anti-money laundering regulations.
– Nikolaos Panigirtzoglou, Managing Director of JPMorgan, 2024
How do bearer and non-bearer tokenized deposits differ?
JPMorgan classifies tokenized deposits into two types: bearer (transferable) and non-bearer (non-transferable). Bearer tokenization can be freely traded but incurs price volatility risks due to supply-demand interactions and issuer reputation.
In contrast, non-bearer tokenization cannot be transferred and is only used for direct payments between banks at a 1:1 value, ensuring that it does not lose value or disrupt the stability of currency within the financial system.
A 2023 study by economists Rod Garratt and Hyun Song Shin warns that transferable tokens, such as stablecoins or bearer tokens, tend to create significant price distortions, adversely affecting currency stability.
Maintaining the 'uniqueness of money' is only feasible with non-transferable tokens to avoid price distortions and risks of financial instability.
– Rod Garratt and Hyun Song Shin, 2023 study
What benefits does non-bearer tokenization bring to the banking system?
According to JPMorgan, non-bearer tokenization allows for fast, transparent, and direct money transfers between banks without losing value. This design enhances safety, increases payment efficiency, and facilitates interaction with Smart Contracts on the blockchain.
The standout advantage of this model is maintaining the original value of deposits when transferring money, similar to traditional electronic payments, while incorporating modern features such as fast settlement times, programmability, and diverse interactions.
What role do stablecoins still play in the cryptocurrency sector?
Despite being tightly regulated, stablecoins remain very popular due to high liquidity and widespread usability in cryptocurrency transactions, decentralized exchanges (DEX), and international remittances. Tether (USDT) and USD Coin (USDC) together account for a large portion of the market capitalization with hundreds of billions of USD traded daily.
JPMorgan states that stablecoins often maintain reserves through safe investments such as short-term government bonds, helping to keep cash flow in the traditional financial system without significantly impacting banks.
Currently, the Bank of England regulates that the issuance of stablecoins must have full reserves at the central bank, limiting yields on deposits. Meanwhile, in the United States, under the auspices of the GENIUS Act, it will pave the way for banks to issue stablecoins integrated into the existing payment system.
Criteria for Tokenized Non-Bearer Deposits Safe Stablecoin & Deposit Insurance Protection, full KYC/AML compliance Depend on reserves and issuer's reputation Transferability Non-transferable, used only between banks Freely transferable in the open market Impact on the system Currency stability, maintaining value Can cause price volatility and risk Applications Interbank payments, smart contracts Cryptocurrency transactions, remittances, DeFi
Frequently Asked Questions
What are tokenized deposits?
It is the digital version of traditional bank deposits, represented by tokens on the blockchain but still retaining legal protection and compliance.
How does non-bearer tokenized deposits differ from bearer tokens?
Non-bearer tokens cannot be transferred and ensure 1:1 value in bank payments, whereas bearer tokens can be traded freely but are susceptible to price volatility.
What is the relationship between stablecoins and the banking system?
Stablecoins are often reserved in safe financial instruments and do not withdraw from the banking system while still being widely used in the cryptocurrency sector.
What is the current stablecoin management policy?
Many countries, such as the UK, strictly regulate that stablecoins must have full reserves and limit yields, while the United States, through the GENIUS Act, allows banks to issue stablecoins legally.
What is the future of tokenized deposits and stablecoins?
Non-bearer tokenization is being prioritized to modernize the financial system with high safety, while stablecoins remain popular due to liquidity and flexibility in the cryptocurrency market.
Source: https://tintucbitcoin.com/token-hoa-tien-gui-uu-tien-tren-stablecoin/
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