Ethereum News Today: Stablecoins Edge Out Tokenized Deposits in Digital Finance Showdown

Omid Malekan, an adjunct professor at Columbia Business School, has raised skepticism about the viability of tokenized bank deposits, arguing they lack the flexibility and technical advantages of stablecoins, according to Cointelegraph.

Malekan's critique centers on the structural differences between stablecoins and tokenized deposits. Overcollateralized stablecoin issuers, which maintain 1:1 reserves of cash or equivalents, are inherently safer than fractional reserve banks issuing tokenized deposits, he argues. Stablecoins also benefit from composability, allowing seamless integration into decentralized applications (dApps) and cross-chain transfers, while tokenized deposits are often restricted by Know-Your-Customer (KYC) controls and limited functionality. "Tokenized deposits are like a checking account where you could only write checks to other customers of the same bank," Malekan said. "Such a token can't be used for most activities."

The debate is gaining urgency as the tokenized real-world asset (RWA) sector expands. Standard Chartered Bank projects that RWAs — including tokenized equities, real estate, and commodities — could surge from $35 billion today to $2 trillion by 2028. This growth is driven by stablecoins, which facilitate liquidity and on-chain transactions. Geoffrey Kendrick, Standard Chartered's head of digital assets research, noted that stablecoins have laid the groundwork for tokenizing traditional assets, with Ethereum likely to dominate due to its proven stability.

However, tokenized deposits face additional challenges. Yield-bearing stablecoins, which offer returns to users, are drawing attention as an alternative to traditional banking products. Malekan highlighted that stablecoin issuers can circumvent yield prohibitions, creating a competitive edge for user rewards. Meanwhile, the banking lobby has resisted yield-bearing stablecoins, fearing they could erode market share and profitability by redirecting interest income.

Regulatory and institutional developments further complicate the landscape. Malaysia's central bank has outlined a three-year roadmap to pilot asset tokenization, focusing on real-world applications like supply chain financing and Islamic finance. JPMorgan Chase, meanwhile, has completed tokenizing a private equity fund and plans to launch a broader investment fund tokenization platform in 2026. These moves underscore the growing institutional interest in tokenization, though regulatory clarity remains a critical hurdle.

Despite the challenges, the RWA market is on a rapid growth trajectory. Standard Chartered forecasts $750 billion in tokenized money-market funds and equities each by 2028, with additional growth in commodities, real estate, and corporate debt. Stablecoin liquidity, now exceeding $300 billion, is fueling this expansion, creating a "self-sustaining cycle" of innovation. RWA Weekly has also tracked near-term developments, such as convenience stores in Hong Kong beginning to accept digital yuan payments and asset tokenization firms planning listings.

Malekan's skepticism reflects a broader tension between traditional finance and decentralized ecosystems. While tokenized deposits may offer specific benefits, such as enhanced transparency, their limited interoperability and regulatory constraints position them as underdogs compared to stablecoins. "Banks must carefully consider these factors when strategizing their approach to digital finance," he concluded.