A new note from the IMF provides an articulate overview of tokenization, as well as posing some hard questions to regulators. The paper was authored by departing IMF Financial Counsellor Tobias Adrian, Yaiza Cabedo and Tommaso Mancini-Griffoli, who now heads the BIS Innovation Hub.
One of the most thought provoking sections explores how tokenized deposits or deposit tokens could be distributed. Today blockchain-based deposits involve a direct relationship between the token holder and the issuing bank who performs KYC. The authors outline two other hypothetical models.
One involves banks distributing tokens via a wholesale provider, who then circulates them to individual wallets and performs KYC (model B). In this case the tokens are still the liability of the bank. Another option (model C) essentially involves wrapped deposits. An intermediary, likely a non-bank, acquires the deposit tokens and issues their own token backed by the bank tokens, while also performing KYC on token holders. In that case, the new tokens are not a bank liability, and this model is possible today, although we’re not aware of any implementations.
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