Currently, most tokenized deposit solutions in production work only for payments between clients of the same bank. Several countries are exploring the use of tokenized deposits that can work between banks, enabling programmable payments.
Examples of these initiatives include the UK’s GBTD and the Regulated Liability Network, the US-based Regulated Settlement Network and Germany’s Commercial Bank Money Tokens (CBMT).
There’s a critical difference between how stablecoins and tokenized deposits work. With stablecoins, the payer simply transfers their tokens to the recipient. With tokenized deposits, the payer sends their bank token, but the recipient receives a different token from their own bank. The mechanics that underpin this process may appear clunky. But depending on the implementation approach, this design could undermine the potential for programmable payments.
The risk is that designing systems around today’s known use cases may lock in constraints that prevent unforeseen innovations – the true power of programmable payments. In the early days of the internet, did people imagine Facebook, Airbnb or Uber? This video presentation explores a potentially serious issue with many interbank tokenized deposit designs, and some solutions.
Article continues …
Want the full story? Pro subscribers get complete articles, exclusive industry analysis, and early access to legislative updates that keep you ahead of the competition. Join the professionals who are choosing deeper insights over surface level news.
