Tokenized fiat refers to a digital representation of traditional fiat currency issued on a blockchain or distributed ledger technology. Each tokenized fiat unit is typically backed one-to-one by an equivalent amount of physical fiat currency held in reserve by a regulated entity. This approach combines the stability and regulatory familiarity of fiat money with the benefits of digital assets, such as instant settlement and programmability. Tokenized fiat facilitates digital payments and offers a stable store of value within the digital asset ecosystem.
Context
Tokenized fiat is a significant area of development for central banks, commercial banks, and financial technology firms, frequently featured in financial news. Discussions often address the regulatory implications, the potential for new payment systems, and its role in cross-border transactions. The development of tokenized fiat, including central bank digital currencies (CBDCs), is poised to reshape the global financial landscape, offering new avenues for digital value transfer and settlement.
A major banking consortium is exploring G7 stablecoin issuance to create a compliant, competitive, and efficient on-chain settlement layer for institutional finance.
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