Bitget App
Trade smarter
Columbia Business professor casts doubt on tokenized bank deposits

Columbia Business professor casts doubt on tokenized bank deposits

CryptoNewsNetCryptoNewsNet2025/11/02 06:42
By:cointelegraph.com

Banks and financial institutions have started experimenting with tokenized bank deposits, bank balances recorded on a blockchain, but the technology is doomed to lose out to stablecoins, according to Omid Malekan, an adjunct professor at Columbia Business School.

Overcollateralized stablecoin issuers, who must maintain 1:1 cash or short-term cash equivalent reserves to back their tokens, are safer from a liability perspective than the fractional reserve banks that would issue tokenized bank deposits, Malekan said.

Stablecoins are also composable, meaning they can be transferred across the crypto ecosystem and used in various applications, unlike tokenized deposits, which are permissioned, have know-your-customer (KYC) controls, and have restricted functionality.

Columbia Business professor casts doubt on tokenized bank deposits image 0
Stablecoins continue to grow as an asset class. Source: RWA.XYZ

Tokenized bank deposits are like a “checking account where you could only write checks to other customers of the same bank,” Malekan continued. He added:

“What’s the point? Such a token can’t be used for most activities. It’s useless for cross-border payments, can’t serve the unbanked, doesn’t offer composability or atomic swaps with other assets, and can’t be used in decentralized finance (DeFi).”

The tokenized real-world asset (RWA) sector, physical or financial assets tokenized on a blockchain, which includes fiat currencies, real estate, equities, bonds, commodities, art, and collectibles, is projected to swell to $2 trillion by 2028, according to the Standard Chartered bank.

Related: BNY explores tokenized deposits to power $2.5T daily payment network: Bloomberg

Stablecoin issuers will share yield one way or another

Tokenized bank deposits must also compete with yield-bearing stablecoins or stablecoin issuers that find ways of circumventing the yield prohibition in the GENIUS stablecoin Act, passing on the yield in the form of various customer rewards, Malekan argued.

The banking lobby has pushed back against yield-bearing stablecoins over fears that stablecoin issuers sharing interest with customers would erode the banking industry’s market share.

The current average yield offered on a savings account at a retail bank in the US or the UK is well under 1%, making anything above that attractive to customers.

The resistance to yield-bearing stablecoins from the banking lobby drew criticism from New York University professor Austin Campbell, who accused the banking industry of using political pressure to protect its financial interests at the cost of retail customers.

Magazine: Can Robinhood or Kraken’s tokenized stocks ever be truly decentralized?

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

You may also like

XRP News Today: Ripple’s Enhanced Custody Initiative Seeks to Open Up the Corporate Cryptocurrency Market

- Ripple acquires Palisade to expand institutional custody capabilities, enhancing secure, scalable digital asset solutions for corporates and fintechs. - Integration of Palisade's MPC security, zero-trust architecture, and multi-chain support enables high-speed transactions and compliance-driven treasury management. - CEO Monica Long highlights secure custody as critical for corporate crypto adoption, combining Ripple's vaults with Palisade's tech for end-to-end institutional solutions. - The $4B strategi

Bitget-RWA2025/11/03 21:14
XRP News Today: Ripple’s Enhanced Custody Initiative Seeks to Open Up the Corporate Cryptocurrency Market

Trump’s Cryptocurrency Pardons Ignite Ethics Controversy Amid Growing Family Wealth

- Trump's pardon of Binance founder CZ Zhao sparks ethics debates over conflating presidential power with family crypto profits. - The $2B World Liberty Financial deal linking Trump's sons to Binance-affiliated entities intensifies conflict-of-interest scrutiny. - Democrats demand congressional review as Trump family's crypto ventures generated $802M in 2025, surpassing traditional business income. - Ethics experts warn of "novel conflicts" as Trump promotes crypto dominance while family profits from opaqu

Bitget-RWA2025/11/03 21:14
Trump’s Cryptocurrency Pardons Ignite Ethics Controversy Amid Growing Family Wealth

XRP News Today: Ripple’s $1 Billion Stablecoin Forges Connection Between Crypto and Traditional Finance

- Ripple's RLUSD stablecoin surpassed $1B market cap, driven by institutional adoption via Ripple Prime's OTC trading platform. - Dual-chain deployment on Ethereum/XRP Ledger and NY Trust compliance enhance RLUSD's utility for cross-border payments and DeFi. - Acquisition of Hidden Road (Ripple Prime) created first crypto multi-asset prime broker, enabling cross-margin trading with traditional instruments. - SEC dispute resolution and strategic infrastructure focus position RLUSD/XRP as foundational assets

Bitget-RWA2025/11/03 20:58
XRP News Today: Ripple’s $1 Billion Stablecoin Forges Connection Between Crypto and Traditional Finance

Can Artificial Intelligence Outsmart the Fluctuations in Cryptocurrency? Google's Prediction for SHIB Ignites Discussion

- Google's Gemini AI predicts Shiba Inu (SHIB) could reach $0.000031 by November 2025, citing DeFi growth and institutional interest in meme coins. - The forecast analyzes market trends, social sentiment, and blockchain data but faces skepticism over volatility and unpredictable factors like regulation. - Critics highlight SHIB's speculative nature, noting past 50% weekly swings and AI's inability to account for irrational market behavior. - Mixed community reactions and regulatory risks underscore the deb

Bitget-RWA2025/11/03 20:58
Can Artificial Intelligence Outsmart the Fluctuations in Cryptocurrency? Google's Prediction for SHIB Ignites Discussion