The future of payments

The future of payments

November 29, 2023

How stablecoins and tokenized deposits innovate the financial services industry

The advent of Distributed Ledger Technology (DLT), with blockchain at its forefront, marks a paradigm shift in the payments landscape, heralding a new era of innovation and cost-efficiency. Central to this transformation are stablecoins and tokenized deposits, poised to significantly disrupt key payment arenas such as cross-border transactions and remittances. In this article, we delve into the complexities of these payment rails, conduct a comparative analysis, and provide our views on high-potential opportunities ripe for exploration by banks, payment companies, and corporates.

Which blockchain-based payment rails are expected to lead the way?

As of today, traditional payment methods such as conventional bank transfers and card-based transactions have a dominant position within the global payments landscape. Recently, however, a broader array of blockchain-based payment rails has emerged into the scene and experienced substantial momentum. We see four main types of rails standing out, each with its unique characteristics: Cryptocurrencies, stablecoins, tokenized deposits, and blockchain-based CBDCs. Unlike cryptocurrencies and CBDCs, stablecoins and tokenized deposits exhibit minimal volatility and can benefit from DLT technology, making them more appealing to drive blockchain-based payments adoption.

How are stablecoins and tokenized deposit expected to develop in the future?

Stablecoins and tokenized deposits, while both operating on blockchain technology, have distinct characteristics in several areas. Stablecoins primarily operate on public blockchains, offering enhanced user accessibility and control, while tokenized deposits utilize private blockchains for better scalability and cost efficiency. In terms of issuing entities and backing mechanisms, stablecoins are usually issued by private entities and backed by assets such as cash or low-risk securities. In contrast, tokenized deposits are issued by regulated financial institutions and backed by deposits on their balance sheets. Their relationships with the financial system also differ. Tokenized deposits are closely integrated, supporting the fractional reserve banking system and offering consumer protection, whereas stablecoins are progressively aligning with the financial system as regulations evolve. Additionally, the nature of these instruments varies significantly. Stablecoins, as bearer instruments, enable instant settlement, while tokenized deposits require traditional ledger settlements and support more stringent regulatory compliance, including KYC and AML checks.

Based on these differences, stablecoins and tokenized deposits are anticipated to serve different purposes. Stablecoins may be widely used for various applications like retail payments and remittances, while tokenized deposits are likely to focus on activities such as inter-bank settlements. Both are expected to have some overlaps in areas like cross-border payments for corporates.

What are the opportunities for banks, payments companies and corporates?

As the trend of blockchain-based payments is still far from its full potential, a multitude of key opportunities is arising for banks, corporates, and payment players. For instance, banks are well-positioned to issue fully backed stablecoins and can offer specialized services such as custody, analytics, KYC, and advisory solutions. They also have the potential to develop consortium-based tokenized deposit solutions. Corporates, on the other hand, can expand their infrastructure to utilize and accept stablecoins and collaborate with banks to create tokenized deposit solutions, adding value through features like programmability. Payment players, meanwhile, can capitalize on these trends by issuing their own stablecoins and integrating stablecoin acceptance into their existing solutions, such as point-of-sale terminals. Additionally, they can offer valuable services to banks and corporates, particularly in areas like analytics for tokenized deposits, thereby enhancing the overall ecosystem.

To conclude, navigating the ever-evolving landscape of blockchain-based payments requires strategic foresight and an adaptive mindset. In a nutshell, our three key recommendations are:

  • Understand the technology: Keep abreast of the rapidly evolving technology landscape and stay informed about current trends
  • Know the regulatory environment: Actively monitor and anticipate regulatory changes and engage with regulators
  • Adjust and expand your business model: Identify potential opportunities, assess their viability, and strategically choose the most suitable implementation method, whether it be organic development or forming partnerships

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The future of payments


This study explores the evolving landscape of blockchain-based payment rails and their growing prominence within the payment ecosystem.

Published November 2023. Available in
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