Definition ∞ A Tokenized Deposit Service involves converting traditional bank deposits into digital tokens that operate on a blockchain or distributed ledger. These tokens represent a claim on an underlying deposit held at a regulated financial institution. This service aims to combine the programmability and efficiency of blockchain with the stability and regulatory oversight of conventional banking. It offers a new mechanism for digital value transfer.
Context ∞ Central banks and commercial banks are actively exploring Tokenized Deposit Services as a potential advancement in digital payments and financial market infrastructure. News often reports on pilot programs and discussions regarding the regulatory treatment of these digital instruments, distinguishing them from stablecoins and central bank digital currencies. The development of such services could significantly impact wholesale and retail payment systems by enabling atomic settlement and enhanced programmability.
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