Category: general

The post Here’s Why Tokenized Bank Deposits Don’t Stand a Chance Against Stablecoins appeared com. BlockchainFintech Traditional banks are finally experimenting with blockchain. Yet their latest innovation, tokenized deposits, may be arriving years too late. Financial institutions envision a future where everyday checking balances live on a distributed ledger. But for Omid Malekan, adjunct professor at Columbia Business School, the concept is little more than a digital illusion one destined to be eclipsed by stablecoins. The Great Banking Copycat Moment In the last decade, crypto projects built what banks never could: instantly transferable digital dollars that actually work. Now, banks want in but without giving up control. Their idea is to take customer deposits and issue them as blockchain-based tokens, effectively “on-chain bank balances.” Malekan dismisses the model as self-defeating. Tokenized deposits, he argues, are the blockchain equivalent of a private intranet in an era of global internet connectivity secure, limited, and ultimately obsolete. These instruments would be usable only among customers of the same institution, fenced in by compliance layers like KYC and transaction permissioning. “What use is a token that can’t travel?” he wrote, describing them as digital checking accounts that stop at the bank’s front door. Stablecoins Already Solved the Problem While banks are still building walled gardens, stablecoins have spent years integrating into open networks that now underpin DeFi, cross-border payments, and on-chain commerce. They are interoperable, composable, and transferable without middlemen. Most importantly, they rely on transparent, full-reserve backing not fractional banking to ensure stability. That structure, Malekan argues, makes them safer from a risk perspective. Stablecoin issuers must hold equivalent assets in cash or short-term treasuries, giving them a liquidity profile banks can’t match. Tokenized deposits, by contrast, remain exposed to the same lending risk that defines the traditional system. Why Yields Will Decide Everything The real blow, however, could come from returns. As.