Tokenized deposits are bank liabilities in token form; stablecoins are claims on a private issuer backed by a reserve pool. Both move dollars on the same rails, but only one clears existing institutional treasury mandates, capital rules, and fiduciary duties without a new legal opinion per transaction. For a regulated institution, the choice is not which is better money. It is which one fits the rules the institution already operates under.
That framing gets lost in most of the commentary, which treats this as a definitional dispute. It is not. It is a classification problem. And classification is what determines whether a bank's treasury desk, an asset manager's COO, or a family office CIO can touch the instrument at all.
The legal nature of the claim is the whole argument
A tokenized deposit is a bank deposit in token form. A stablecoin is a claim on a private issuer backed by a reserve pool. The token is the wrapper; the liability underneath is what a compliance officer actually has to book. Every downstream question follows from that distinction: insurance, capital treatment, bankruptcy treatment, who the counterparty risk runs to.
The European Banking Authority made this explicit in its December 2024 report on tokenised deposits, which found that tokenisation does not alter the fundamental legal nature of the claim: it remains a deposit, legally distinct from e-money tokens under MiCAR. The FDIC reached the same conclusion from the other direction. In an April 2025 speech, Acting Chairman Travis Hill stated that "deposits are deposits, regardless of the technology or recordkeeping deployed." Deposit insurance, supervisory treatment, and depositor preference all travel with the token.
Stablecoins sit under a different regime. In the United States, the GENIUS Act signed in July 2025 created a dedicated federal framework for payment stablecoins, explicitly barring them from paying yield and excluding tokenized deposits from the definition. In Europe, stablecoins fall under MiCAR's e-money token rules. Two regimes, two distinct instruments, two compliance treatments that diverge on every operational question. The technology is incidental.
Why classification is the institutional question
Institutional mandates are the binding constraint, not the technology. Tokenized deposits inherit the entire legal and prudential scaffolding of a bank deposit, so they fit existing rules without rewriting them. Stablecoins inherit a newly built regulatory category that most existing mandates have not yet incorporated. That asymmetry is what determines who can hold what today.
A bank treasurer cannot hold an asset that is not eligible under liquidity coverage rules. Pension CIOs are bound by the investment policy statement. Trustees cannot touch anything that requires a bespoke fiduciary opinion per transaction. The Financial Stability Board captured this asymmetry in its October 2024 report on tokenisation, concluding that tokenized instruments issued by regulated entities "may not require fundamental regulatory modifications" when the underlying economic substance is preserved. Non-bank stablecoins do require new frameworks. That work is still being drafted, adopted, and interpreted across jurisdictions.
This is why the marquee wholesale deployments chose deposits. JPMorgan's Kinexys platform scaled from roughly $2 billion in daily volume in late 2024 to around $5 billion by late 2025, and its own product page describes JPMD as "a blockchain-based deposit product that represents a general deposit liability of the issuing bank," noting that "deposit tokens differ from stablecoins in key areas, including interest payouts and deposit treatment." When JPMD launched for institutional clients on Base in November 2025, the named counterparties were B2C2, Coinbase, and Mastercard. The instrument, the venue, and the counterparties were all built to sit inside existing bank liability rules.
The singleness-of-money concern lands differently for each instrument
Singleness of money is the property that a dollar always equals a dollar, regardless of which regulated bank issues the liability. Stablecoins as bearer instruments can deviate from par under stress; tokenized deposits, by construction, are bank liabilities at par that ultimately settle in central bank money. The distinction is not theoretical. It has shown up in every recent stress event and in every BIS paper on the subject.
The BIS has been the most explicit voice. In Bulletin 73, Garratt and Shin argued that "private tokenised monies that circulate as bearer instruments, like stablecoins, may entail departures in their relative exchange values away from par," while "tokenised deposits that do not circulate as bearer instruments but rather settle in central bank money are more conducive to singleness." Two years later, BIS Bulletin 108 argued that the standard "same risks, same regulation" principle faces limitations when applied to stablecoins, requiring tailored regulatory approaches that account for their bearer-instrument structure. In the 2025 Annual Economic Report, Hyun Song Shin described tokenised deposits settling against tokenised central bank money as the architecture in which the payment function and the settlement function sit on the same programmable platform, and Agustín Carstens framed the objective directly: "The next-generation monetary and financial system combines the time-tested principles of trust in money underpinned by central banks with the functionality unlocked by tokenisation."
Stablecoin reserve disclosures mitigate par risk through periodic attestation; tokenized deposits mitigate it because the liability is a bank deposit at par by construction. Deposit-rail operators, including FractiFi, build a protocol-enforced invariant between locked deposits and outstanding token supply. That mechanism delivers the same property without an attestation cycle, issuer discretion, or reserve composition risk.
The empirical case against the attestation model has real data behind it. The NY Fed's December 2025 analysis of the SVB episode noted that USDC "traded at 86 cents to the dollar" at its trough when roughly $3.3 billion of Circle's reserves were stranded at the failed bank, against stockholders' equity of only $0.34 billion. DAI, GUSD, and USDP depegged alongside it through DeFi collateral contagion. Concentration is part of why: NY Fed research from April 2025 estimated Tether and USDC together at roughly 86% of a $232 billion stablecoin market, with Tether holding 18% of its reserves in non-stablecoin crypto and loans as of December 2024.
Policy treats classification as a financial-stability question
Classification determines who sits inside the supervised banking perimeter, and that has direct consequences for credit. If tokenized money sits inside a bank, it intermediates lending. Migrate it outside the bank into stablecoin reserves, and deposit-funded lending contracts. The Federal Reserve has now modelled that effect explicitly, and the policy direction is to keep tokenized money inside the institutions that intermediate credit.
A Federal Reserve FEDS Note from December 2025 concluded that "each dollar of deposit withdrawal can lead to a more-than-one-dollar contraction in lending as institutions rebalance to meet liquidity, leverage, and capital requirements," with a $500 billion shift projected to reduce lending by $190 billion to $408 billion. The same note observed that "many banks are developing tokenized deposit products that aim to combine the convenience and programmability of digital tokens with the regulatory protections of traditional banking services."
The historical analogy is useful. A NY Fed Liberty Street piece from October 2025 drew the parallel between current stablecoins and pre-Fed national bank notes of 1863–1935, noting that deposits eventually prevailed in that earlier cycle because they could earn interest and sit within a supervisory framework. The ABA took a similar position in a March 2026 banking journal piece: "Unlike stablecoins, tokenized deposits preserve yield without sacrificing liquidity."
The wholesale settlement layer is already being built on deposits
Three production deployments confirm the direction. The HKMA, Standard Chartered, and the BIS Innovation Hub have all chosen tokenized deposits over stablecoins for wholesale settlement, each working with central bank money as the ultimate settlement asset. JPMorgan reached the same conclusion years earlier with Kinexys. The pattern is consistent across jurisdictions because the underlying constraint, classification compatibility with existing regulated counterparties, is the same.
The HKMA announced EnsembleTX in November 2025 to settle real-value tokenized deposits through the HKD RTGS system during 2026, evolving toward 24/7 tokenised central bank money. Standard Chartered launched a tokenized deposit solution in December 2025 covering HKD, CNH, USD, and SGD with Ant International as its first client; Ant has integrated with roughly ten major banks' tokenized deposit solutions. The BIS Innovation Hub's Project Agorá brings together seven central banks and more than forty private institutions, with a report due in H1 2026, testing tokenised commercial bank deposits settling against tokenised wholesale central bank money. At the project's April 2024 launch, Hyun Song Shin stated the objective directly: doing so "without sacrificing the safeguards on the integrity and governance of the monetary system."
None of this means stablecoins have lost the broader payments argument. Visa's USDC settlement capacity ran at a $3.5 billion annualised rate by late November 2025, Coinbase holds roughly $20 billion of USDC, and Nium's partnership with Coinbase pays out USDC in more than 190 countries. Retail and cross-border flows are a genuinely separate use case where the bearer-instrument feature is an advantage, not a liability. The GENIUS Act gave US issuers the regulatory clarity they lacked. These two instruments will coexist for a decade. The question is which one an institution can hold today under the rules it already operates under, and for wholesale settlement between regulated counterparties, that answer is already converging.
The counter-argument worth acknowledging
Tokenized deposits are not costless. They require an approved institutional account at the issuing bank, which limits reach and creates a real access constraint for counterparties outside the bank's customer base. Interoperability across banks is a work in progress. Project Agorá exists in part because it has to be solved. The NY Fed's September 2025 work on tokenized investment funds noted that 24/7 settlement can accelerate run dynamics in a stress event, a property that applies to any tokenized liability. These are real constraints, not arguments against the instrument. They are arguments for building the infrastructure that addresses them.
FractiFi builds the tokenized deposit and settlement infrastructure for institutions that are not money-centre banks: mid-tier banks, asset managers, private equity firms, family offices, and pension vehicles that need programmable, bank-backed rails without running a Kinexys-scale internal program. The base layer enforces a 1:1 reserve invariant at the protocol level, with compliance embedded at the settlement layer rather than bolted on. If you are evaluating how to move tokenized settlement from pilot to production without rewriting your treasury mandate, we would like to talk. Our infrastructure overview and banking solutions page cover the technical and commercial detail.
