Bank of England policymaker Megan Greene said Sunday at a conference in Dubrovnik, Croatia, that tokenised deposits - digital representations of traditional bank accounts - are poised to displace stablecoins as the leading form of digital money.
Greene told attendees that commercial banks will move to protect their deposit bases, and that dynamic could drive the adoption of tokenised deposits. "I think tokenised deposits are probably going to take over from stablecoins and five years from now, I suspect we might wonder why we were talking about stablecoins," she said.
She noted that a market exists for a range of digital money instruments, including central bank digital currencies, stablecoins and digital bank deposits. Greene said that, while multiple forms of digital money have a place, tokenised deposits will likely prevail once commercial banks recognise the risk of losing traditional deposits.
The observation came alongside a recognition that stablecoins have expanded in popularity in recent years, although issuance has levelled off in recent months.
On the same panel, U.S. Federal Reserve policymaker Christopher Waller offered a different stance. Waller defended stablecoins as a financial innovation that may reduce costs, and argued that stablecoins should not be quashed by excessive regulation.
The exchange highlighted a divergence among senior policymakers about which digital instruments will dominate the future payments landscape: Greene emphasised incumbent banks transforming their deposit products into tokenised forms to preserve their customer bases, while Waller underscored the potential efficiency gains stablecoins might deliver and cautioned against regulatory measures that could stifle that innovation.
Context for markets and sectors
Greene's prediction points to potential strategic moves within the banking sector as commercial institutions consider digitised deposit offerings to stem outflows and retain customers. Waller's remarks focus attention on the regulatory balance for crypto-related products and the payments and fintech sectors that could be affected by policy choices.
Note: The article reports remarks made by the two policymakers and describes how they view the roles of tokenised deposits and stablecoins. It does not offer projections beyond the statements presented by Greene and Waller.