Tokenized Deposits Deemed Inferior to Stablecoins by Expert
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Columbia Business professor Omid Malekan has expressed significant skepticism regarding tokenized bank deposits, asserting they are an inferior product compared to stablecoins due to a fundamental lack of flexibility and technical features. Tokenized bank deposits represent digital claims on traditional fiat currency held in a commercial bank, leveraging distributed ledger technology (DLT) to potentially enable instant settlement and fractional ownership within a bank's controlled ecosystem. However, Malekan's critique highlights that these digital representations inherently carry the limitations of the existing banking system.
Key features that tokenized deposits are perceived to lack, in contrast to stablecoins, include advanced programmability, composability with a broader decentralized finance (DeFi) landscape, permissionless access, and global, 24/7 settlement capabilities. While stablecoins, often built on public blockchains, offer these attributes, tokenized deposits are typically envisioned on permissioned DLTs, bound by banking hours, regulatory frameworks, and geographical restrictions. Their technical specifications would likely involve centralized control over issuance and redemption by the issuing bank, requiring strict Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, and operating within a regulated perimeter.
The potential benefits of tokenized bank deposits, though limited compared to stablecoins, could include streamlining interbank settlement processes, improving reconciliation for corporate treasuries, and potentially enabling new financial products within a highly controlled and regulated environment. The target audience for such a product would primarily be banks themselves, large financial institutions, and corporate clients seeking more efficient internal or inter-institutional transfers. However, their centralized nature and limited technical sophistication mean they cannot replicate the borderless, always-on, and highly composable characteristics that make stablecoins a powerful tool for global digital commerce and innovative financial applications.
