Tokenized Money: "Tomorrow belongs to those who can hear it coming."
I can hear the sweet music of tokenized payments, can you?
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HAND CURATED FOR YOU
Tokenized money is coming. Can you hear it? David Bowie’s quote is as poignant today as ever.
Tokenized money is the sound of the future, and with all that is happening from the digital euro to the US’s new love of stablecoins, it’s obvious that big changes are coming.
Understand that it doesn’t matter whether CBDCs, stablecoins, or tokenized deposits breakthrough Western payment markets first. In fact, it will likely be not just one but some combination of them all.
Given that each tokenized payment method has underlying different technologies, banks need to start preparing for this revolution now.
Being late to this party is not an option. Most of the world is looking for faster, cheaper ways to pay, and once they become available, your institution has to be on it from day one or prepare to bleed clients.
Digital is destroying bank brands. Banking is increasingly just another digital service, and people can change banks just like they change from Netflix to Apple TV. The expectation of loyalty is oversold.
I’m a good example. I just moved the majority of my bank assets to a new digital player and left the dregs at my old bank, where I didn’t bother to close the account! They don’t even seem to know that I left and never asked why!
This will take collaboration. No bank is going to do this alone. The reality is that tokenization won’t just change a bank’s IT platform but their business models.
Concepts like programmability, instant KYC, and low fees will change the realm of the possible, as will the use of AI.
External talent is the only way to bring your team forward and the reality is that everyone needs to start now.
Delay is not an option for those that can hear tomorrow coming.
👉The State of Play:
1️⃣ Digital counterparts: Forms of tokenised money resemble traditional money:
➣ Retail CBDC and cash,
➣Wholesale CBDC and central bank reserves,
➣ Tokenised deposits and traditional deposits,
➣ Stablecoins and e-money.
2️⃣ Desired commonalities: All forms of tokenised money shall share two key features:
➣ Singleness: All forms of money hold the same value.
➣ Interoperability: All forms of money work seamlessly across systems.
3️⃣ Differences: Forms of tokenised money differ vastly in terms of issuers, technical functionalities, capabilities, use cases, access and reach.
4️⃣ Coexistence: Due to these differences, the various forms of tokenised money serve distinct purposes and enable different use cases. As a result, it is likely that all forms will coexist in the future.
5️⃣ Adoption: Consumers tend to be indifferent between different forms of money. The “success” of each form of tokenised money largely depends on its use cases, adoption rates and successfully built network effects.
Read my other article that urges banks to prepare now for the digital euro:
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