Stablecoins Face Challenge From Tokenized Deposits, BoE Says
A senior Bank of England policymaker has delivered one of the strongest critiques yet of stablecoins, arguing that tokenized bank deposits are likely to eclipse privately issued digital dollars within the next five years as the global financial system embraces blockchain-based payments.
Summary:
- Bank of England policymaker Megan Greene said tokenized deposits could overtake stablecoins within five years.
- Her comments exposed a growing divide between UK and US regulators over the future of digital money.
- The debate comes as governments and regulators tighten oversight of the rapidly expanding stablecoin sector.
Greene Bets on Tokenized Deposits Over Stablecoins
According to information from Investing, speaking during a panel discussion on stablecoins and monetary policy at an economic conference in Dubrovnik, Croatia, on May 31, Bank of England Monetary Policy Committee member Megan Greene argued that tokenized bank deposits represent the most likely future of digital finance.
Greene suggested that today’s stablecoin debate could become obsolete as regulated financial institutions deploy blockchain-based versions of traditional bank 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,” Greene said during the discussion.
To illustrate her view, Greene compared the competing forms of digital money to a race involving three animals.
“The tortoise is the CBDC, the hare is the stablecoin, and the rhinoceros is the tokenized deposit,” she said, adding that while all three models could coexist, tokenized deposits appear best positioned to dominate over the longer term.
Concerns Over Stability and Banking Risks
Greene’s skepticism centers on what she views as structural weaknesses in the stablecoin model.
She argued that stablecoins can struggle to maintain stability during periods of market stress and may facilitate illicit financial activity. More importantly, she warned that widespread stablecoin adoption could weaken commercial banks by pulling deposits away from the traditional banking system.
Such a shift could reduce banks’ lending capacity and complicate the transmission of central bank monetary policy, an increasingly important concern among policymakers evaluating the future of digital payments.
Greene acknowledged that banks have been relatively slow to launch tokenized deposit products, but attributed that delay largely to concerns about disrupting existing business models and fee structures.
According to Greene, once financial institutions recognize that blockchain-based deposits are becoming inevitable, investment and development efforts are likely to accelerate significantly.
Federal Reserve Offers a Different View
Greene’s position was challenged during the same panel by Federal Reserve Governor Christopher Waller, highlighting a widening philosophical divide between regulators on opposite sides of the Atlantic.
While UK policymakers increasingly emphasize financial stability concerns, Waller defended stablecoins as an important financial innovation capable of improving competition in payments and settlement markets.
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Waller also argued that stablecoins strengthen the global role of the U.S. dollar. Because issuers typically back their tokens with U.S. dollars and Treasury securities, growing stablecoin adoption creates additional demand for dollar-based assets and reinforces America’s monetary influence abroad.
Under this framework, stablecoins serve not as a threat to traditional finance but as an extension of the existing dollar system into the digital economy.
The differing views reflect a broader debate among policymakers over whether digital currencies should be primarily issued by private firms, commercial banks, or central banks.
Regulatory Pressure Intensifies
The discussion comes as lawmakers and regulators worldwide move to establish comprehensive rules governing digital assets.
In the United States, recent legislative efforts, including the GENIUS Act and the CLARITY Act, seek to create clearer regulatory standards for stablecoin issuers while imposing safeguards similar to those faced by traditional financial institutions.
Meanwhile, banking policy experts and central bankers continue to warn that stablecoins function as a form of private money that may lack the guarantees associated with sovereign-backed currency.
The concern centers on what economists describe as the “singleness of money”—the principle that one dollar should always be equal to another dollar regardless of where it is held. Regulators fear that privately issued digital currencies could face confidence shocks during periods of market stress, creating risks similar to historical bank runs.
A New Battle for Digital Money
The debate over stablecoins, tokenized deposits, and central bank digital currencies is rapidly becoming one of the most important discussions in global finance. JPMorgan chief Jamie Dimon also issued sharp criticism, sharing that banks will not allow stablecoins to generate yield, as this threatens the entire industry
Supporters of stablecoins argue that they have already demonstrated significant real-world demand, processing trillions of dollars in transactions annually and serving as critical infrastructure for digital asset markets.
Critics, however, believe that trust, regulation, and financial stability will ultimately favor tokenized deposits issued by regulated banks and backed by existing banking frameworks.
As governments develop digital asset regulations and financial institutions expand blockchain-based services, the competition between stablecoins, tokenized deposits, and central bank digital currencies is likely to define the next phase of the global payments industry.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Zdravkov
Reporter at CoinsPress
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 10,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
