A panel at yesterday’s Digital Euro Conference explored the trade offs between stablecoins and tokenized commercial bank money. Jón Egilsson, a former Chairman of Supervisory Board of the Central Bank of Iceland, argued that e-money is a safer option than banks. He made some colorful statements, equating regulated banks to hedge funds and describing central bank digital currencies as ‘nonsense’. There was also some limited discussion about tokenized deposits.
Tokenized deposits are simply a representation of a bank account on a blockchain.
Mr. Egilsson noted that the Federal Reserve was founded in 1913 to provide stability and address the issue of bank runs. A hundred and ten years later, the challenge of bank runs persists. The problem is that banks lend out their funds. He’s not the first central banker to raise this issue. Miguel Fernández Ordóñez, the former Governor of the Bank of Spain, previously went as far as saying that banks “are designed to fail“.
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