Deposit Tokenization

Definition ∞ Deposit tokenization is the process of representing traditional bank deposits as digital tokens on a blockchain or distributed ledger. These tokens digitally represent a claim on a corresponding amount of fiat currency held in a regulated financial institution. This innovation aims to bridge conventional finance with digital asset systems, offering programmable money functionalities. It enables efficient and transparent transfer of value within a digital environment.
Context ∞ Deposit tokenization is a significant area of development for central banks and commercial financial institutions exploring the future of money, including central bank digital currencies and wholesale digital tokens. A key discussion point is how these tokenized deposits can offer instant settlement and enhanced programmability while maintaining regulatory oversight and financial stability. This concept holds promise for streamlining interbank settlements and facilitating new forms of digital commerce, potentially altering the landscape of global payments.