The financial system may be moving toward blockchain without moving toward a stablecoin-dominated future.
That distinction is becoming increasingly important.
At Jackson Hole, Bank for International Settlements General Manager Pablo Hernández de Cos challenged the idea that stablecoins can provide reliable money for payments at scale. His preferred direction is not a return to older infrastructure, but tokenized commercial-bank deposits that can capture some of blockchain’s advantages while remaining inside the existing monetary system.
European Central Bank Executive Board member Isabel Schnabel approached the same problem from another layer. If financial activity moves on-chain, she argued, central-bank money must be able to follow it there.
Taken together, the two positions reveal an important shift in the institutional response to crypto.
Banks and central banks increasingly do not need to choose between preserving their role and adopting blockchain. They can attempt to do both.
The emerging contest is therefore less about whether finance becomes tokenized than about what kind of money a tokenized financial system will use.
Stablecoins Had the First-Mover Advantage
Stablecoins solved an obvious problem before traditional finance had an equivalent answer.
Blockchains could move assets globally, continuously and programmatically, but they needed something that behaved like money. USDT and USDC filled that gap by giving exchanges, wallets and on-chain applications access to digital representations of dollars.
Their advantage today is not theoretical.
Stablecoins already have liquidity, integrations and network effects across public blockchains. They can move between platforms and jurisdictions without requiring every participant to belong to the same banking network.
Traditional banks are now trying to reproduce some of those capabilities without abandoning deposits.
A tokenized bank deposit can also become programmable and interact with digital assets, but its underlying structure remains familiar: it is still a liability of a commercial bank.
That distinction matters because the banking system has spent decades making money issued by different institutions behave as one currency.
A dollar deposited at one bank does not normally trade at a discount to a dollar deposited at another. Payment and settlement infrastructure preserves that equivalence behind the scenes.
The BIS worries that a world of privately issued stablecoins could make that harder. Different tokens can have different reserve structures, redemption arrangements, liquidity and technological networks, creating the possibility of a more fragmented monetary system.
Tokenized deposits are an attempt to modernize the technology without surrendering that monetary architecture.
Putting Bank Deposits On-Chain Creates Another Problem
Tokenization does not automatically make bank money interoperable.
If Bank A issues a tokenized deposit and Bank B issues another, the financial system still needs mechanisms that allow both to exchange at par and move reliably across networks.
Otherwise, tokenization simply recreates fragmentation in a different form.
This is where stablecoins retain a meaningful advantage. Their infrastructure already operates across large parts of the crypto economy, while banks still need to determine how tokenized deposits issued by different institutions will communicate with each other.
But interoperability is only part of the problem.
Commercial-bank deposits are not the final layer of the monetary system.
Banks settle obligations with one another using central-bank money. That hierarchy provides an anchor beneath the deposits consumers and businesses use every day.
If deposits migrate to tokenized infrastructure while central-bank money remains disconnected from it, the architecture is incomplete.
That is the gap the ECB increasingly wants to close.
Central Banks Want a Place On-Chain Too
Schnabel’s argument is consequential because it extends tokenization all the way to the monetary foundation of the financial system.
The Eurosystem is already working on mechanisms that would allow transactions involving distributed-ledger technology to settle in central-bank money. Its Pontes initiative is designed to connect DLT platforms with existing TARGET Services, while European authorities are also exploring longer-term solutions for tokenized wholesale settlement.
The objective is not to create another stablecoin.
It is to ensure that a bond, security or tokenized bank deposit can ultimately interact with the same form of money that anchors settlement in conventional markets.
That creates a possible architecture in which nearly everything looks technologically different while the institutional hierarchy remains surprisingly familiar.
Assets can exist on distributed ledgers. Commercial banks can issue tokenized deposits. Central banks can provide settlement money compatible with those networks.
Blockchain becomes the infrastructure connecting the layers rather than a replacement for the institutions occupying them.
And that possibility complicates one of the oldest assumptions surrounding crypto adoption.
A financial system can become substantially more on-chain without becoming substantially less bank-based.
The Fight Is Moving From Technology to Money
Stablecoins still have something the institutional alternatives cannot easily manufacture: years of accumulated adoption.
They already work across exchanges, wallets and applications, particularly in crypto markets and international transfers. Tokenized bank deposits and central-bank settlement systems remain far earlier in their development.
That makes outright replacement an unlikely near-term outcome.
A more plausible future is one in which different forms of tokenized money occupy different parts of the market. Stablecoins could remain powerful where open, cross-platform circulation matters most. Tokenized deposits could become more attractive inside regulated banking relationships. Central-bank money could continue providing the final settlement layer beneath both assets and commercial-bank liabilities.
The strategic stakes are considerable.
Money determines more than how payments move. Its structure influences where deposits sit, how banks fund lending, where reserves accumulate and how central banks inject liquidity when financial markets come under stress.
This is why the institutional response to stablecoins is becoming more sophisticated than simply regulating them.
Banks do not necessarily need to keep blockchain outside the financial system to protect their position. Central banks do not necessarily need to prevent assets from moving on-chain to preserve their monetary role.
They need their own money to work there.
Crypto’s first monetary innovation brought conventional money onto new financial rails through stablecoins.
The next contest is over whether banks can bring the monetary system itself onto those rails before stablecoins become indispensable to them.