DUBROVNIK, Croatia, May 31 - Bank of England policymaker Megan Greene said on Sunday that the current popularity of stablecoins may be temporary and that tokenised deposits - digital representations of conventional bank deposits - are likely to gain ground.
Greene made the comments at a conference in Dubrovnik, suggesting that in a matter of years the financial sector might regard stablecoins as a passing phase. She said there is room in the market for several digital payment instruments - central bank digital currencies (CBDCs), stablecoins and digital deposits - but posited that tokenised deposits could become the dominant option once commercial banks move to protect their deposit bases.
"I think tokenised deposits are probably going to take over from stablecoins and five years from now, I suspect we might wonder why we were talking about stablecoins," Greene said. She framed the issue as one of incentives for banks, arguing that digital deposit products have not yet proliferated because commercial banks have been reluctant to forfeit fee income and other revenues tied to traditional deposit structures.
On the same panel, US Federal Reserve policymaker Christopher Waller offered a contrasting assessment, defending stablecoins as a legitimate payment instrument and a potential source of competition that could lower costs. Waller argued such financial innovation should not be stifled by overly burdensome regulation.
"I’ve always just looked at stablecoins as a payment instrument; there’s nothing evil about it, nothing dangerous about it," Waller said. "They are just bringing competition into the payments world." He added that stablecoins are being used for cross-border payments and noted the intensity of bank lobbying as evidence banks view these instruments as a threat.
Greene raised concerns about stablecoins' stability and regulatory clarity, and she also noted that some stablecoins have been used for illicit purposes. Another issue she highlighted is the displacement of deposits from commercial banks by stablecoins, which she suggested could weaken the transmission of monetary policy if widespread.
She said commercial banks have not yet fully embraced tokenised deposits because of the fee revenue at stake, but predicted that banks will eventually act to develop these products when they recognise the competitive pressure. Greene used an analogy to characterise the contest among digital options: "I like to think of it as a massive race between the tortoise, the hare and the rhino," she said. "The tortoise is the central bank digital currency ...the hare is stablecoins and the rhino is tokenised deposits. We’ll probably end up with all three, but if I had to put money in one ... it would be the rhino, tokenised deposits, which I think will probably take off."
The panel exchange underscored differing perspectives among senior policymakers about the future shape of digital payments. Greene emphasised structural and regulatory limitations facing stablecoins and highlighted commercial banks' incentives to develop alternatives. Waller emphasised competitive benefits and payment functionality, warning against heavy-handed regulation that could stifle innovation.
Both voices signalled that the market may accommodate multiple digital instruments, but they disagreed on which will predominate. Greene placed her expectation on tokenised deposits; Waller stressed stablecoins' potential to reduce costs and inject competition into payments.