Tokenized Deposits vs. Stablecoins: The Battle for Blockchain Finance's Future

Tokenized bank deposits face skepticism from Omid Malekan, an adjunct professor at Columbia Business School, who argues they lack the flexibility and technical advantages of stablecoins, according to Cointelegraph. In contrast, Standard Chartered Bank predicts the tokenized real-world assets (RWA) market could surge to $2 trillion by 2028, driven by decentralized finance (DeFi) growth and stablecoin liquidity, according to CoinPedia. The diverging perspectives highlight a critical debate over the future of blockchain-based financial systems.

Malekan contends that tokenized deposits—bank balances recorded on a blockchain—suffer from restrictive functionality compared to stablecoins. He likens them to "a checking account where you could only write checks to other customers of the same bank," emphasizing their limited utility in cross-ecosystem transactions, as reported by Cointelegraph. Stablecoins, by contrast, are overcollateralized and operate with 1:1 reserves, offering greater safety and composability. They can be transferred across crypto platforms, integrated into decentralized applications, and used in lending protocols, features absent in tokenized deposits, which are subject to know-your-customer (KYC) controls and permissioned access.

Standard Chartered, however, envisions a transformative role for tokenized RWAs, forecasting a 5,600% increase in market value from $35 billion today to $2 trillion by 2028. The bank attributes this growth to the expanding stablecoin ecosystem, which has injected $300 billion in on-chain liquidity and facilitated broader adoption of DeFi. Geoffrey Kendrick, the bank's head of digital assets research, argues that stablecoins have laid the groundwork for tokenizing traditional assets, including money-market funds, equities, and real estate. He projects $750 billion in tokenized money-market funds and listed equities each, with additional growth in funds, commodities, and corporate debt, as reported by TradingView.

Ethereum is positioned to dominate this expansion, according to CoinoTag. The blockchain's decade-long reliability, lack of mainnet outages, and established ecosystem outweigh competitors' speed or lower costs. Kendrick noted that Ethereum's network effects will underpin most RWA activity, even as other blockchains compete. The bank also highlighted regulatory developments, such as the U.S. GENIUS Act and Digital Asset Market Clarity Act, as catalysts for institutional participation, a point outlined by The Block.

Despite the optimism, challenges remain. Malekan's critique underscores risks associated with tokenized deposits, including their reliance on fractional reserves and limited interoperability. Meanwhile, Standard Chartered cautioned that regulatory uncertainty—particularly in the U.S.—could hinder progress if clarity fails to materialize before the 2026 midterm elections, as noted by Markets.com.

The debate reflects broader tensions in finance. While Malekan views tokenized deposits as inferior to stablecoins, Standard Chartered and other proponents see RWAs as a bridge between traditional markets and blockchain innovation. As DeFi evolves from niche experiments to mainstream applications, the race to define the next era of financial infrastructure is intensifying, according to TradeBrains.