Digital money: Not all tokens are created equal

Stablecoins, tokenized deposits, CBDCs and the changing shape of money

The future of money isn’t only about making balances programmable. It’s about understanding what those balances represent, who stands behind them, how they can be redeemed, and how they behave under stress.

Stablecoins have demonstrated demand for always-on digital value transfer. Tokenized deposits show that banks can respond without giving up the deposit model. Central bank digital currencies (CBDCs) and tokenized reserves may provide another critical component—trusted settlement infrastructure.

But, although these different forms of money may seem similar to the end user, they’re not the same.

Money used to be easier to explain: Understanding digital money

For a long time, the banking industry could explain money through a relatively familiar hierarchy. Central bank money sat at the foundation. Commercial bank deposits were the money most households and corporates used. E-money and stored-value balances sat within the payments layer. The roles weren’t always simple, but they were at least familiar.

That clarity is now being challenged. A corporate treasurer, a product lead, or a payments architect may now see balances labeled as stablecoins, tokenized deposits, CBDCs, tokenized reserves, e-money balances, or tokenized money market funds. All may look cash-like in a user interface, but they’re not the same thing.

The practical question isn’t simply: Is this money? The better questions are: who issued it, what legal claim does the holder have, how is it backed, how is it redeemed, where does it settle, what happens in stress, and how does it appear in the bank’s books and controls?

Comparing digital money: Issuers, claims, and implications for banks

As new forms of digital money emerge, familiar distinctions between deposits, payment instruments, stablecoins, and central bank money are becoming harder to navigate. A useful starting point is to look beyond the technology and focus on the underlying economic and legal characteristics: who issues the money, what claim the holder has, how it is backed and redeemed, and what role it plays in settlement. The table below provides a simple taxonomy to help distinguish the major forms of money and highlight why each matters to banks.

This table compares major forms of money by issuer, holder claim, and their implications for banks.

The distinction matters because digital money isn’t simply a technology choice. Each form creates different implications for funding, liquidity, legal claims, controls, settlement, and the customer experience.

What’s driving adoption of stablecoins, CBDCs and tokenized money?

Digital money adoption isn’t accelerating because of a single technology or a single regulation. It’s the result of several pressures arriving at the same time:

• Cross-border payments remain too slow, expensive, and fragmented for many corporate and retail use cases.
• Stablecoins have demonstrated that market participants value 24/7 digital value transfer.
• Tokenized securities, funds, and real-world assets need a tokenized cash leg if settlement is to become genuinely atomic.
• Central banks are exploring wholesale CBDC and tokenized reserves as the settlement layer for a tokenized financial system.
• Banks are responding to the threat of deposit displacement and the opportunity to modernize commercial bank money.
• Corporate clients increasingly expect real-time liquidity visibility and more programmable treasury services.

This isn’t a crypto sideshow. It’s a payments, liquidity, settlement, data, and operating-model issue for banks.

Comparing the strengths and weaknesses of new forms of digital currency

Stablecoins, tokenized deposits, and CBDCs are often discussed as part of the same digital money landscape, but they serve different purposes and carry different implications for banks. The key distinctions lie in who issues them, what backs them, how settlement occurs, and where trust ultimately resides. For banks, understanding those differences is essential to evaluating the opportunities, risks, and strategic roles each model may play in the future of payments and tokenized finance.

This table compares the key strengths, weaknesses, and strategic implications of stablecoins, tokenized deposits, and CBDCs for banks.

Stablecoins: Useful today, risky in stress

Stablecoins shouldn’t be dismissed. They address real market needs, including 24/7 value transfer, cross-border reach, open-network access, digital asset settlement, platform payouts, and programmable payment workflows. Just as importantly, they have pushed the industry to ask why traditional forms of money can’t move with the same speed and flexibility.

At the same time, stablecoins introduce important systemic considerations. Under normal conditions, a fiat-referenced stablecoin may function much like money. Under stress, however, its underlying structure becomes more visible, and it’s ultimately a claim that depends on the issuer, the quality and liquidity of the reserves, the custodian, and the network through which it operates.

• Depeg risk: The token may no longer reliably maintain its intended value relative to the underlying fiat currency.
• Redemption and run risk: Holders may rush to convert stablecoins into bank money during periods of stress.
• Reserve liquidation risk: Issuers may need to sell reserve assets quickly to meet redemption demands.
• Deposit displacement risk: Funds may shift from commercial bank deposits into stablecoin structures.
• Singleness of money risk: Different tokens may carry different levels of trust and trade at different values, weakening the principle that equivalent forms of money should exchange at par.

The policy issue: Preserving the singleness of money

The singleness of money is the expectation that one pound, euro, or dollar should remain one pound, euro, or dollar, regardless of the form in which it’s held. A bank deposit and cash aren’t the same legal claim, but the financial system is designed so they exchange at par in normal conditions.

Digital money complicates that expectation. A pound held in a bank account, a pound-denominated stablecoin, a tokenized deposit, and a tokenized money market fund may appear “cash-like” to the user, but they may not be equally trusted, redeemable, or final.

The implication for banks is that, if money fragments into multiple private tokens with different issuers, reserves, and redemption rights, the system risks moving from a unified monetary architecture to a marketplace of money-like claims.

Tokenized deposits offer a bank-native response

Tokenized deposits provide a different model. They are commercial bank money represented on programmable infrastructure and remain liabilities of the issuing bank. That is what makes them attractive to banks: they can introduce programmability and richer transaction capabilities without moving client money outside the banking model. Within a single institution, tokenized deposits can support treasury movements, approved institutional transfers, internal liquidity management, and controlled settlement.

For customers, this can create a faster and more flexible service. For banks, it can help preserve the deposit relationship. However, there’s an important limitation. Bank A’s tokenized deposit isn’t automatically Bank B’s money. Once a transaction needs to be made between institutions, tokenizing the deposit is only part of the answer.

The next question is settlement.

In my next blog on digital money, I'll look at why tokenized deposits alone don’t solve the interbank problem and why the future of digital money will depend on settlement, interoperability, and trusted infrastructure.

I'll also be exploring these issues further in an upcoming webinar, “What profitable roles can banks play in the digital currency race?” I'll join a panel of experts to discuss how banks can operationalize digital money, navigate settlement and liquidity challenges, and identify opportunities as the market evolves. Register for the webinar to join the conversation.

If you'd like to discuss the ideas in this blog or learn more about CGI's approach to helping banks navigate the evolving digital money landscape, please reach out.