BoE backs tokenized deposits over stablecoins

TLDR

A senior Bank of England policymaker has argued that tokenized bank deposits will likely beat stablecoins over the next few years.

1. Megan Greene from the BoE said stablecoin demand may fade and be overtaken by tokenized deposits, citing stability and regulatory concerns.
2. Her view reflects central bank worries that stablecoins drain bank deposits and weaken monetary policy, while tokenized deposits keep money inside banks.
3. For crypto users, this points to a future where bank issued tokens and on chain deposits grow, while non bank stablecoins face tighter rules rather than outright replacement.

Deep Dive

1. What The BoE Policymaker Actually Said

Bank of England Monetary Policy Committee member Megan Greene told a conference that stablecoin popularity may soon fade, likely replaced by tokenized deposits, which are digital versions of commercial bank deposits recorded on new rails.

She said that in five years people might wonder why they were talking about stablecoins, and used an analogy where CBDCs are the tortoise, stablecoins the hare and tokenized deposits the rhino, adding she would back the rhino, tokenized deposits, in that race.

Greene criticized stablecoins as not truly stable, facing regulatory uncertainty, being used for illicit activity, and diverting deposits from banks in ways that can complicate monetary policy transmission, according to a recent conference report.

2. Why Tokenized Deposits Appeal To Central Banks

Tokenized deposits are still bank liabilities, just represented on shared or programmable ledgers, so they sit firmly inside existing prudential regulation, deposit insurance and central bank liquidity frameworks.

For central banks, this reduces the risk that large volumes of money migrate into privately issued stablecoins that might not be fully regulated, potentially weakening control over credit creation and interest rate pass through.

Greene also noted that digital deposits have been slow to take off mainly because banks fear losing fee income, but argued those fees are likely to erode anyway, so banks will eventually push harder into tokenized offerings when competitive pressure bites.

3. What This Means For Crypto And Stablecoins

Greenes comments align with a broader pattern where regulators accept that some form of digital money will coexist with cash, but prefer forms they can supervise, such as CBDCs and bank issued tokens, over open stablecoins.

There is still disagreement among central bankers, though. On the same panel, US Federal Reserve governor Christopher Waller defended dollar stablecoins as useful payment instruments and said banks oppose them because they feel threatened, showing policy is not settled globally.

Conclusion

The BoE voice backing tokenized deposits over stablecoins highlights a key fault line between open crypto money and bank controlled digital money. For crypto users, the likely direction is not a ban on stablecoins but a gradual tightening of rules alongside rapid growth in bank issued tokens and tokenized assets, with real impact on which rails DeFi, payments and liquidity can safely plug into over the next few years.