BoE Official Backs Tokenised Bank Deposits Over

A quiet fight over digital money is turning into a serious question for banks, regulators, and ordinary savers.

If your salary sits in a bank account today, the bank uses that deposit to lend, earn, and move money. But if payments shift to crypto-linked stablecoins, that old model starts to shake.

At a conference in Dubrovnik, Megan Greene, a policymaker at the Bank of England, argued that stablecoins may not stay popular for long. Her bet is on tokenised deposits, which are digital versions of normal bank deposits.

Banks may fight back soon

Greene’s point was simple. Stablecoins got attention because they made digital payments look faster and cheaper.

A stablecoin usually tracks a currency like the US dollar. In theory, one token should stay close to one dollar. That makes it useful for crypto trading and cross-border payments.

But Greene said commercial banks may eventually build their own answer. That answer is tokenised deposits.

Think of it like your bank balance, but built for digital networks. It remains a bank deposit, not a private crypto token. The bank still holds the relationship with the customer.

Greene said banks have moved slowly because they do not want to lose payment fees. But she argued they may lose those fees anyway if they delay.

That is the part Indian banks should watch closely. Payments income may look small beside loans. But at scale, it matters.

India’s UPI story has already shown this. Once payments become cheap and instant, customers stop tolerating slow systems.

Stablecoins face a trust problem

Greene also raised the old question around stablecoins. Are they really stable when markets panic?

That question is not academic. Stablecoins depend on reserves, rules, and trust. If users doubt the backing, they can rush to exit.

For a household, this sounds distant. But the impact can travel fast.

A young professional sending money abroad wants low fees. A small exporter wants quick settlement. A crypto trader wants dollar exposure without using a bank each time.

Stablecoins promise all three. But they also sit outside the comfort zone of traditional banking.

Greene said regulation remains a concern. She also pointed to illicit use in some cases.

That does not mean every stablecoin is unsafe. It means regulators worry about what happens when money moves outside their usual channels.

For central banks, this is a control issue too. Monetary policy works partly through banks. When deposits leave banks, that pipe weakens.

In plain English, rate hikes and cuts reach people through loans, deposits, and bank funding. If money shifts elsewhere, that signal gets duller.

Waller sees payment competition

Christopher Waller, a policymaker at the Federal Reserve, took a different view on the same panel.

Waller defended stablecoins as a payment tool. He said they bring competition into payments and may lower costs.

That argument will sound familiar in India. Every time a new payment rail arrives, incumbents warn about risk. Customers, meanwhile, ask only one thing. Does it work better?

Waller said banks see stablecoins as a threat because these tokens help move money across borders. He argued that banks would not oppose them so hard if they felt no pressure.

This is the sharpest part of the debate. Regulators talk about stability. Banks talk about safety. Innovators talk about cost.

All three can be true at once.

Cross-border payments remain expensive and slow in many corridors. Anyone who has paid overseas education fees knows this pain.

If stablecoins cut time and cost, people will use them. But if they fail under stress, users will pay the price.

India should watch the model

India has not built its payments future around stablecoins. It has gone the public digital infrastructure route.

UPI, Aadhaar-linked systems, and bank-led transfers form the backbone. The Reserve Bank of India has also tested a central bank digital currency.

A central bank digital currency is official digital money issued by the central bank. It is not a crypto asset.

Tokenised deposits sit somewhere else. They are still bank money, but made easier to move on digital systems.

That model may suit countries like India. It keeps banks inside the system while allowing faster settlement.

For Indian consumers, the key issue is not the technology label. It is safety, cost, and access.

If a worker in Kerala sends money to a relative in the Gulf, the fee matters. If a small business imports parts, settlement time matters. If a saver holds digital money, trust matters most.

Stablecoins have grown because they solve real pain points. But Greene’s warning is that banks can copy the useful parts.

If banks offer digital deposits that move quickly and cheaply, stablecoins lose some shine.

The race is still open

Greene described the future as a race between central bank digital currencies, stablecoins, and tokenised deposits.

Her view favours tokenised deposits. Waller’s view gives stablecoins more room.

The likely outcome may be messier. Different tools may serve different uses.

Central bank digital currencies may help public payments. Stablecoins may stay useful in crypto markets and some global transfers. Tokenised deposits may become the bank-friendly bridge.

For investors, this matters because the stablecoin boom has supported parts of the crypto market. If demand fades, crypto liquidity may change.

For banks, it is a warning. They cannot assume deposits will always sit still.

For regulators, the job is harder. They must allow cheaper payments without letting hidden risks pile up.

India’s lesson is clear. Digital money succeeds only when people trust it during stress. Speed is attractive, but safety decides survival.

Stablecoins may not disappear tomorrow. But the fight has moved beyond crypto circles. It is now about who controls the next version of everyday money, and whether ordinary users get cheaper, safer payments from that race.