A tokenized deposit is a digital representation of traditional fiat currency held at a regulated financial institution. These deposits convert conventional money into a blockchain-based token, allowing for programmable functionality and instant settlement on distributed ledgers. Unlike stablecoins issued by private entities, tokenized deposits typically represent a direct liability of a commercial bank. They combine the security and regulatory oversight of traditional banking with the efficiency and transparency of blockchain technology.
Context
The primary discussion around tokenized deposits concerns their potential to modernize payment systems and facilitate central bank digital currencies (CBDCs). They offer a regulated alternative for on-chain transactions, reducing counterparty risk compared to many privately issued stablecoins. A key debate involves the interoperability of different tokenized deposit systems and their integration with existing financial infrastructure. News frequently covers pilot programs and regulatory frameworks supporting the development and adoption of these digital assets.
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