Definition ∞ Cash tokenization is the conversion of traditional fiat currency into digital tokens on a blockchain. This process creates a programmable digital representation of cash, enabling transparent and immutable transactions. It essentially digitizes a claim on a specific amount of real-world currency. This method offers new efficiencies for financial settlements.
Context ∞ This concept holds significant relevance for the development of central bank digital currencies and private stablecoins. Its potential to modernize payment systems and reduce transaction costs is widely discussed. Regulatory authorities are actively working to establish appropriate legal and operational guidelines for its widespread adoption.
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