Tokenized Bank Deposits Lag as Yield-Bearing Stablecoins Dominate
Columbia Business School’s Omid Malekan argues tokenized bank deposits are inferior to overcollateralized stablecoins due to fractional-reserve risks, KYC controls and limited composability. Unlike stablecoins backed 1:1 by cash reserves, tokenized bank deposits operate on permissioned networks, restricting DeFi integration, atomic swaps and cross-border payments. As real-world asset tokenization nears $2 trillion by 2028, yield-bearing stablecoins offering shared interest threaten traditional banks, which lobby against such tokens to protect market share. NYU’s Austin Campbell criticizes this stance for sidelining retail savers. Traders should note stablecoins remain the primary source of on-chain liquidity and DeFi participation.
Bullish
This critique underscores stablecoins’ technical and regulatory advantages over tokenized bank deposits, reinforcing their dominance in on-chain liquidity and DeFi. Short-term, traders may increase stablecoin allocations for yield and cross-border transfers. Long-term, stablecoins could see wider adoption as banks struggle with regulatory hurdles, bolstering demand and utility for tokens like USDC and USDT.