Tokenized Bank Liability

Definition ∞ Tokenized bank liability refers to the digital representation of a bank’s financial obligations, such as deposits, as tokens on a blockchain. These tokens are claims on the issuing bank and can be programmed to carry specific rights or conditions. This innovation allows for real-time settlement, enhanced transparency, and the potential for new financial products. It bridges traditional banking with distributed ledger technology.
Context ∞ The concept of tokenized bank liability is gaining considerable attention from central banks and financial institutions exploring the future of digital currencies and payments. A key debate involves the regulatory implications and operational challenges of integrating blockchain technology into existing banking infrastructure. Future developments will likely include pilot programs for wholesale central bank digital currencies and tokenized commercial bank money. This approach could significantly modernize global financial systems.