Move over, stablecoin – a new token is coming

THE world of digital cash is divided into two camps. The traditionalists want a public authority to remain in charge of providing a safe medium of exchange for people to settle claims against one another. Or else, they say, private money could become as unreliable as in the pre-US-Civil-War era of wildcat banking, when notes issued by a lender in Tennessee would be discounted by 20 per cent in Philadelphia.

On the other hand, the experimentalists believe that excitement around central bank digital currencies, or CBDCs, is a fad – a bit like the 1980s’ “parachute pants”. As long as a nation has established a unit of account, it’s fine to step aside and allow the non-state sector to come in with its own stablecoins, electronic representations of value pegged to the dollar, euro, yen, or pound. Who needs the Federal Reserve to issue a digital dollar to compete with China’s e-CNY, when there’s already Tether?

While there’s no resolution in sight to this public-private debate, there’s now a third element – deposit tokens. The germ of this idea got validated recently as part of Project Guardian, a collaboration between Singapore’s central bank and the financial industry to explore the economic potential of asset tokenisation.