Tokenized Deposits, Stablecoins and CBDCs in Modern Finance

The future of money is often characterized by tokenized deposits, stablecoins and central bank digital currencies (CBDCs). While very similar in terms of what they offer, their key distinguishing factor is the issuer:  central banks for CBDCs, banks for deposit tokens and non-banks for stablecoins. All 3 have great potential in both wholesale and retail payments. For example, CBDCs are progressing from experiments to pilot trials in many countries, and digital currencies are continuously evolving and increasingly used in real-world applications and pilot projects like China’s e-CNY. Despite progress, much work remains, particularly in improving cross-border payments. Simplifying payment chains and harmonizing regulatory frameworks will go a long way towards increasingly the efficacy of cross-border payments. In this regard, much attention should be given to referencing initiatives like Global Layer One, which aims to create a shared ledger platform for regulated financial institutions. This ecosystem is envisioned to facilitate payments, asset tokenization and other financial services, avoiding the creation of restrictive, centralized systems.