Debate: Stablecoins vs. Tokenized Deposits vs. CBDC | DAS London 2025 | Day 2 | Institutional
Summary
Investment Theme: The discussion centered on the evolving landscape of digital currencies, specifically stablecoins, tokenized deposits, and Central Bank Digital Currencies (CBDCs), highlighting their distinct roles and potential coexistence in the financial ecosystem.
Market Insights: Panelists debated the core problems these digital forms of currency aim to solve, such as settlement speed, programmability, financial inclusion, and resilience, with different solutions addressing different needs.
Company Discussions: Representatives from major financial institutions like Barclays and UBS shared insights on their strategies and initiatives in digital assets, emphasizing the importance of interoperability and the challenges of integrating new digital systems with existing infrastructure.
Opportunities: The potential for digital currencies to enhance cross-border payments, reduce transaction costs, and improve liquidity management was highlighted, with stablecoins seen as particularly promising for retail and DeFi applications.
Regulatory Considerations: The conversation touched on the evolving regulatory landscape, with a focus on the need for clear standards and the role of regulators in ensuring financial stability while fostering innovation.
Technological Integration: The importance of seamless integration of digital currencies into existing financial systems was emphasized, with banks and financial institutions urged to move decisively to adopt these technologies.
Key Takeaways: While stablecoins are currently dominant in the DeFi space, tokenized deposits and CBDCs are expected to play significant roles in the future, with all three forms of digital currency likely to coexist and complement each other in the broader financial ecosystem.
Transcript
Well, hello folks and welcome to this this session. Um, today we're going to be talking about stable coins versus tokenized deposits and CBDC's. Um, but first, let's set the stage. Tokenization is reshaping how money itself exists and currencies that ictus means of value distribution in today's world has become a hot bed of innovation in something which can be quite boring. Um, so from stable coins to TDS to CBDC's, today we're going to unpack the the sticking points and some of the solutions that uh need to be addressed. Um, and ultimately our panelists are going to determine where they think value will reside. Um, by way of introduction, I'm Theo Golden. I'm a portfolio manager and I lead on tokenization at Bailey Gford. Uh, we're a UK asset manager, run about 300 billion of uh, dollars under under management. And uh to introduce our our top tier uh panelists, we've got Ryan Haywood, who's the head of digital assets and strategic investments at Barclay's uh one of the UK's biggest banks and oversees the bank's digital asset strategy. We've got Shannan Zo who leads UBS's strategy and execution around digital assets uh including initiatives in CBDC's uh digital isments and digital payments. And then we got uh Joseé Fernandez de Ponte where he's tasked uh driving the ecosystem growth as president of the uh the Stella Stella Foundation and scaling portfolio companies and expanding adoption. Um so really excited to to dig in. Um so maybe just to to start with a scene setter um I think if we're going to determine what's the best we should probably determine what the problem is, right? Um so that's maybe where we'll start. to run. What is the core problem you think digital forms of major currencies are trying to solve and who's it for? Is it settlement speed? Is it program uh programmability? Is it inclusion? Is it resilience? And do you think any of these one solutions solves it all? Um well, nice to nice to speak to you today. So, I think um they're all potentially solving for slightly different things. And so, I guess it depends a bit on form versus factor. So CBDC's I think are often touted for this financial inclusion point. I you know I think that that is maybe slightly tenuous depending on the jurisdiction but I absolutely get where they're you know significantly underbanked um sections of the population in certain jurisdictions or countries where you may see that come into uh come into its own. I think for something like um transferability or crossber payments, CBDC's are are a harder a harder axe to grind because I think you've ultimately got to get that coordination across a number of central banks and that is easier said than done to to get out of the gate. Um, something like programmability I think probably applies to all of them. And really that's just the foundational basis of trying to upgrade your capabilities of money. And as soon as you start to accept the fact that more more finance and assets are going to go onto chain and you're going to want um the ability to have a series of transactions or have DVP or PVP moving together, I think that programmability is sort of pretty fundamental to all aspects of it. But I do think something like um tokenized deposits occupy quite an interesting part in the ecosystem there. There may be slightly newer as banks are starting to think about this capability and how they roll that out to clients. It it definitely gives you the program programmability p piece. It um it potentially gives you that speed of settlement given you've got the existing two-tier structure and and traders already connected up to to most of the things you're going to need. the interoperability or crossber piece is harder to solve. Um and I think people recognize that but you know we've we've been working with a few of the banks around something called GBTD which was the RLN project and and again at least that's trying to trying to solve some of that interoperability at least within borders and then we know there are other um you know crossber onchain cache solutions which you can link up and start to provide some of the capability. So again, I think different for different uh form factors and therefore ultimately you see a plethora of solutions that will coexist. That's that's pretty helpful. I'm going to be slightly cheeky and bring Jose in. Um the easiest reaction to that is uh well Ryan, you're a banker. Uh so you'd want to say something along those lines. And Jose, I' maybe invite you to challenge and maybe give us a bit of a a more of a a DeFi angle or or maybe just, you know, are stable solving something which which the other two can't. I think they are, but and hopefully the next time that we do a panel like this, we're going to call it a stable coin sand tokenized deposits and and CBDC because they serve for different things. If you think about the types of money that are that are out there, there are essentially three types of money. There is central bank money, commercial bank money and then e- money and stable coins are basically tokenized e- money when deposit tokenized deposits are tokenized commercial bank money and CBDC's are tokenized central bank money. If you think of the stuff that you can do with the stable coins that people should think of stable coins as the money that you have in your fintech wallet, in your PayPal wallet or Venmo or Revolute, pick pick the one you want. But now all of a sudden you can use it everywhere and and those are things that are different than what you can do with tokenized deposits. Tokenized deposits are a fantastic instrument for interbank settlement. I struggle to see them as a payment instrument for retail. So what happens if I get if somebody pays me with a tokenized deposit from bank X and I want to liquidate that in country Y. How does that work? And if it is commercial bank money, it has counterparty risk for for that commercial bank. So they serve different purposes. I think that absolutely there is a space for tokenized deposits and there is a space for stable coin. The way that we think about the problem that we are trying to solve is access is access to financial services. Stellar has been around for about 10 years and the mission has always been to increase access to everyday financial services and in some cases we're going to use stable coins for that. There's a lot of work that has happened in remittances or dispersements for refugees where stable coins are the best tool for the job and there are going to be some other instances in which we will want to use or our ecosystem will want to use tokenized deposits and there is if there is a moment in which central banks are issuing real CBDC's and they choose to deploy them on permissionless blockchains we would love for them to deploy on Stellar too. And Shannon that's probably a good point to bring you in as Well, obviously you've done a huge amount on on CBDC's. Um, you know, to a lot of folks who are in the Trafy world, you know, it feels probably pretty familiar and and and we kind of can grasp it, but you know, for people who are more kind of cryptonative, it it can sometimes feel that, you know, it's a solution in search of a a problem. So, I guess what's like the core value ad? What's the core differentiator of of a of a CBDC? And and, you know, how can it deliver on that that promise of public trust? Yeah, that's a really good question. I think when we're looking at CBDC, we have to distinguish the different types of CBDC. So, you have the wholesale central bank digital currency, wholesale CBDC, which is actually the digital currency that we probably explored more deeply from the institution perspective. You also have the retail CBDC, retail central bank digital currency, for example, in the euro, digital euro is being given a lot of push by the by the politicians. So those type of retail CBDC probably more being used for the day-to-day use of yourself and myself potentially buy a cup of coffee or pay the train tickets. So uh when it come to the CBDC I think is I would not say it is a solution looking for problems. I I would rather say it is a solution that is targeted for different type of multiple different type of needs. Um so very concretely for the central banks or for a nation the central bank digital currency or even just the traditional uh central bank money that represent the sovereignty of a country uh it is the tool no matter in the current society or in the digital economy to really control and also to monitor to influence the financial stability and to allow the securities of this of the society and most importantly to create a trust anchor. This trust anchor matters for the day-to-day use and also matters for the financial economy and large institutions. So maybe give you two uh very concrete example where UBS is heavily involved in the CBDC initiatives. Um so I and I always just say okay in the when it comes to CBDC or central bank or digital currency look at the uh capital market and also look at the transaction banking. So from the uh transaction banking world or the correspondent banking uh experiment there's a very famous projects now led by the bank for international settlements the BIS uh joined force with seven central banks globally including the bank of England Swiss National Bank New York Fed etc etc. So UBS is one of the commercial bank joined this uh uh initiative together with another 40 plus commercial uh entities. So through this uh initiative what we are going to hopefully see is to how we how the tokenized central bank reserve in the wholesale space and the tokenized deposit of a commercial bank can be interoperable on a unified ledger or unified platform. By doing so we will have 247 faster and more efficient and cheaper crossber payments. So this is something that we want to achieve and we can only achieve by having the tokenized central bank reserve onchain as well because in today's world as much as we want okay you can cut off the correspondent bank from seven or 17 to two but ultimately when you have to do the settlement and then clearing between two institution central banks have to come to play. Um a second example I can quickly give you is in the capital market space. So UBS is also involved in the project Hisa which is the Swiss National Bank's initiative uh of using wholesale central bank digital currency and is a real wholesale central bank digital currency. It's not fake money or you know uh play money right it's a real money and uh to use this wholesale CBDC in the Swiss Frank to settle uh financial transactions including bond insurance etc. So why do I mention this? Because back in 2022 uh my team together with the Treasury colleagues, we already launched the tokenized uh digital bonds uh in the Swiss market 375 million. So back then we did have a digital payment rail but that was not a wholesale central bank digital currency. So we do have benefit from the efficiency from the speed of a tokenized bond issuance and the settlement on digital rail. But what we could not achieve is to reduce the credit risk down to zero intraday at least. So here comes the play of a central bank digital currency by the Swiss National Bank. So last year when we launched our another central bank uh another digital bond we were able to use the wholesale CBDC in Swiss Frank to settle our digital bonds. So that achieves the ultimate risk reduction uh for the wholesale financial institutions. So just want to share these two examples. That's those both both very helpful examples and I think it's kind of helpful also for us to to to ask the question because obviously we're kind of stuck in these kind of quite old school financial institutions particularly the three of us uh and and these can feel like kind of tangible examples uh in our kind of everyday work but it's often actually quite hard to think about that in terms of um in terms of just people on the on the street. What what does what does the benefit of having much more interoperability between commercial bank central uh commercial bank digital money and central bank digital money? What why why is that an improvement? Why is that better for Joe Blogs on the street rather than just kind of being a helpful liquidity feature and a gizmo for for our for our kind of incumbent digital uh incumbent banking organizations? Um so so valid question I guess the consumers always get a slightly warped I guess uh impression of how exactly that financial ecosystem is connected together and you know they in the UK you benefit from faster payment so everything looks pretty seamless and instantaneous. Obviously that's not quite true in the in the back end and that in itself brings costs which ultimately have to be uh have to be funded some way or another. I think um even when you look at something like faster payments infrastructure which is very helpful in terms of allowing that um seemingly instantaneous switching of of or payments from account to account within the UK. Um you know that is still legacy infrastructure. um there is a question of how do you you know how do you upgrade that what does that look like uh how costly will that be and so I think as you as you start to get onchain or funding financing moving to onchain solutions there's naturally a a jumping off point where you start to say well hold on should we not think about um what infrastructure we should be building in the 21st century and I think the UK Treasury has already set that task with things like their national payments vision you know, that's a bit of a call to arms both amongst the regulators but also some of the commercial players like the banks to start thinking through, you know, logically in some some sort of sequential fashion as to what you need to do to to build out or re rebuild some of the UK payment infrastructure. And I would think digital assets naturally fit into that. But I think it goes back to um to to the point one of the points made around um even even at the retail level if you want to go and transact with let's say securities that experience is still quite clunky. So even though maybe you can do accounttoount payments quite quickly when it comes to trading securities and you're trying to do DVP that still takes time because that goes through crest on the asset side that has its own settlement cycle. So as you start to see the sway of bringing assets on chain or tokenization if you want uh and that can marry up with digital cash you start to see all of that that that reduced down and then there are other use cases like again within the context of um GBTD a couple of the use cases that we're looking at which is effectively this interoperability of tokenized money between banks. Couple of them one is a peer-to-peer use case. So the idea again being well you've got account to account transactions amongst your peers or amongst uh other account holders. You don't necessarily know them. So let's say it's secondhand marketplaces um your um your gum trees or your Facebook marketplaces. How do you solve for that potential for fraud or for transactions that ultimately you're having to wire money but maybe you haven't received the goods. So there is potential capacity there to have locking capabilities which you can associate with programmable money. So that is potentially helpful. And then when you think of things like the mortgage journey which is another another interesting example you know trying to stitch up uh housing transactions very complicated. Uh if you've got let's say seven parties in a chain and you've got to go and fund into all of your conveyance accounts and then they've got to go and sequence all of those payments into someone else's accounts. uh you can easily get into cutoff times because your traditional infrastructure is not 247 uh it doesn't move on weekends etc. Um it'd be a lot potentially a lot easier if all of that money stays in the accounts and you can potentially lock that and say, "Okay, everyone can validate that all of this is here. It's all locked so it can't be used for alternative purposes, but as soon as everyone's done, you hit click and everything goes." And ideally that happens on the asset side or the property title deed. So, I I do think you'll actually see even though a lot of the benefits may sit ultimately on the wholesale side, I think retail um customers will start to see those benefits and piggyback of some of those infrastructure upgrades. Sha, did you have anything to add to that or um yeah, I think maybe just quickly uh u commenting from the retail side and of course UBS we do not operate retail banking outside uh Switzerland. Um but uh I think maybe just uh mention things like in the Swiss retail uh ecosystem, right? Uh we do have a very uh advanced platforms things like trends uh etc. already allow you to do very fast uh payments between the retail uh users. Um however I think they in the different nations we still start seeing as you said the instant payment being roll out in different countries. So uh what does that mean? It means for the utail retail user we do not necessarily need to pay to pay up to benefit from these services. However, if you look behind the scene, it is the bank like ourselves actually have to pay or have to build the infrastructure and have to actually also to preserve the liquidity to making sure we can really fulfill the 247 uh redemption requirements when our uh retail user needs. So I think they well why do the retail people need to care? because they need to care. This is all the cost that will eventually passing on no matter to themselves directly or from the different channel uh to the broader population. Yeah, maybe to add to that, one of the things that I found really really interesting when we're having conversations like this about use cases is sometimes the premise is a bit let me say reductive. I think that all of us we spend a ton of time in rooms where people are asking about the use case and I'm sure it happens with the audience as well. Say, hey, why do we need a stable coins if we can have tokenized deposits? Why do we need X if we have Y? And I think that in some cases is a fundamentally flawed question. So when when you look at from the regulatory point of view, I think it's important to keep in mind that the role of the regulator is to maintain financial stability and consumer protection is not to demand exante use cases because they're not there to gatekeep and vet the use case. The market will come up with a with a use case. And we've been in this game for long enough that it feels like we are starting to find out the granularity of the use cases. And I used to run a fairly large remittance business inside of PayPal. And the reason that we started to move that towards stable coin was not ideological. It was not for decentral decentralization was because it was better effects, faster settlement time, less counterparty risk. Uh but then two weeks ago, I was talking to someone who's a large asset manager who operates on the secondary market for non-performing loans. Their point of moving some of their flows into stable coin was time to cash and say, "Hey, it takes me two weeks to collect the money and then I need to go to the service agent and need to see which liability goes to whom." Their time was two weeks to two weeks faster cash to after collection. So all that granularity of the use case will come from the subject matter experts in each specific business and the people who are interacting with it every day. uh and I think that we are starting to move from the very plain vanilla that use cases that we used to talk hey this is going to be good for crossber payments and remittances we're go we have gone to the opposite extreme on hey this is very good for defi and and for programmatic lending and borrowing and now we are starting to find that space in the middle where people have accepted that this is here to stay and this is a technology that is getting to the point where enterprisegrade uh solutions can be put in case and it's going to be on all of us to find out what is the specific use case where it makes sense and in some cases maybe it will not make sense but I but I believe that in many it will maybe I can just uh just comment on that just to follow up what you have said right and also from the end user perspective no matter their retail people or they are corporate institution uh I often find that they do not want to take the burden of doing the integration and getting used to the new system or too many new different platforms so It's really the responsibility of ourselves to making sure this transition is as seamless as possible. Um uh just take some examples. I speak with our corporate and institutional treasurers very often because the token I deposit for example we're uh we're working on right at the moment is really at this first stage target for those audience right so from their perspective especially corporate treasurer um they normally do not have a large treasury uh operations team like like a bank right they have very limited capacity resource so for them to actually plug into a blockchain ecosystem or real is very difficult then they probably still using a little bit more how to say legacy treasury management system to doing their cash flow and the payments. So if we are now coming up with a new type of DT payment asking them to integrate is very difficult to sell the the gig. So I think it's really about how do we actually help those treasuries and uh no matter institution or corporates to do the intraday liquidity management a lot better and that I think also comes up with the new solutions like tokenized managing fund and that's a is completely different story we probably don't have to comment it today I mean that's that's an interesting one there especially around um so one of the core use cases we see is is around that treasury management function and particularly for kind of multinational companies which genuinely have are just archaic systems and it is it's a painful pro process. Um do you feel that uh particularly on the banking side and I'll start with Jose as maybe the challenger. Do you think the banks are moving fast enough to to build those solutions in a way which the tangible benefits are visible or do you think that there's a a slight kind of paradigm kind of taking place where the banks necessarily aren't moving quick enough to develop those solutions and folks are looking to stable coins because they want to they they see the end goal. they see the vision and they just want to deliver it now and right now and and here rather than waiting for their banking counterparties to catch up. So of course I I will always want the banks to move uh faster but also you need to remember that the banks are not there to move fast and break things are are there to move and make sure that nothing breaks. So there has been early adoption. You would expect the early adoption to happen in other places. The good thing of the banks is that when they start moving, it's very difficult. It's very difficult to get them to move, but it's also once they get moving, it's very difficult to make them stop. Uh, and you've seen probably that early the early adoption obviously was on crypto ecosystems. Then it was you saw the payment companies. I'm seeing a ton of activity on the asset management side and I'm seeing a ton of conversation around on banks especially around stable coins, less about the the RWA side. You want them to move faster of course but especially you want them to move decisively because you don't want I think that we are past the point of innovation theater and proofs of concept and that that's something that we had to go through but we are on the other side of it massive distribution will happen in the places where the retail and corporate consu customers are today and those are largely with the banks and the asset managers and the payments companies and as Yan was saying you need to make it easy for your client to say yes. They're not going to they will not have laser eyes. They're not going to care about decentralization for the sake of decentralization. So getting those distribution channels, you don't get to liquidity and distribution if it is not through the existing financial tapestry. So yeah, I would want them to move faster. I'm extremely happy that they are moving. Well, I can certainly say that two people are moving very quickly. We got them on the stage. I I just wanted to I wanted to ask uh maybe Ryan, I'll start with you. Um it feels like the conversation around stable coins particularly has moved really quickly in a very short amount of time despite a lot of us maybe talking for for for a while longer, but it's definitely come into the the hot bed of discussion. I've certainly been asked by more uh clients about stable coins than I than I have ever in the last six months. So, but I one of the questions we get asked a lot is the standards that have been set are they the final set of standards that we'll end up with in 5 years time. Do we think there is still a progress to towards a better and improving solutions? And and what does that look like? And and maybe I'll start with what Ryan had said. Um is there a second mover advantage for regulators like the UK to iterate and improve? Yeah, I think that's that's fair. So I agree the speed of change across stable coins has been pretty fast and we we know why that's that's happened. It's been a transformational year. Um as you said there hasn't necessarily been that guidance in place for a lot of a lot of jurisdictions. So that's just taking shape. Uh banks at the very least want to see where that lands and and I said that's not even the ink's not even dry yet. They've still got to be implemented. So there's there's still a process to go through for that. Um I think it's a relevant point you made about some you know something like mo going up first uh very helpful useful to to set some sort of standards um but obviously if the ground shifts from around you that can very quickly look like it's um slightly out of kilter with maybe the the direction of travel elsewhere. So the no doubt there may be recalibration of that at at some point. Um, I think your I think your point about um how how quickly that's starting to to move and it it's an interesting it's an interesting dynamic because you you've definitely got these pockets of DeFi system which can move at great pace. I mean still I think where stable coins are today versus where they will be in five years both the regs that may shape that will be quite different because I think regulators are unsurprisingly to a certain extent cautious and they want to see they want to understand the risk they definitely want to avoid unintended consequences of you know huge liquidity drains out of the traditional banking system or something like that or obviously dep peegging risks and and and those kinds of points. So understandably they they're slightly reluctant to just fully embrace it. But by the same token, I think stable coins are at the starting innings. So in in terms of, you know, what those things are used for um uh how they are how they moved around the globe, that's still very early stages, right? It hasn't even really permeated significantly out of the crypto space yet. um the infrastructure although there's been there has been some of this built you know the idea of to the distribution point the idea of getting stable coins into the traditional final financial ecosystem that's still in the process of being built out how do banks connect to this how do they accept it what do banks what is their role in the ecosystem are they going to manage reserves are they going to issue coins like the this is all happening at once and you've seen there various banks looking at different solutions They're obviously speaking to some of the existing private sector operators to try and work that out and it's all it's all ultimately happening real time. But I I think your ultimate uh working hypothesis that things will look quite different in a few years time is is a fair one. And I I guess one one thing I'm interested particularly in context of of this weekend uh which was you know sharp and painful for a lot of folks potentially at this conference. Um, something that I was thinking about it this morning was like would CBDC's or tokenized deposits been would would they have been a a help or a hindrance in in this kind of weekend's market activity and kind of by by parcel of that will we ever see something like a tokenized deposit which is truly interoperable with with DeFi um and truly actionable in the way that we want to use maybe as a broader ecosystem uh within decentralized finance. Maybe I'll start with Shannon. Yeah, I think uh um so a tokenized deposit I think at this moment I think is also at the early stage. Um most of the large banks today is exploring what to do. Uh and many of them now is coming to a stage to launch or already launched. Um but one big constraints of the token I deposit today is that u everything is only working within their own ecosystem. So like uh you can only send a tokenite deposit from one account to another account one client to another client within the same banking uh ecosystem in in uh instead of cross bank. So I think that is a challenge that all the large banks who are like myself working on the tokenizite deposits fully aware and wanting to address. So how do we actually address this this this issue? There's multiple ways to do so and of course you can always go off you know offchain and onchain offchain onchain to facilitate this if you have to send tokconite deposits to a part other parts of the world where your banking ecosystem is not stretched to um but then you can also using the other instrument for example if the likes of project agora went live then you will have a multilateral scheme to allow the money to go across the globe uh and uh yes stable coin and uh defy there's also bringing new possibilities, right? Because many people now assessing, okay, would a stable coin be they a good option for the last mile of a payment when the money need to go into a country, especially if that country is underdeveloped. Uh and uh when it comes to DeFi, I think it's also an interesting point because today we certainly see more stable coin and crypto being used in the D5 world instead instead of tokenized deposits. But we also know like the D5 players do use their traditional bank accounts to upload or to un uh um uh unramp their money into the D5 system. So I think it's a matter of what is the best user experience for the DeFi players to feel they can actually get the money into the system. But but I I guess the only other thing is obviously there is a little bit of a convergence that has to happen because while there hasn't been these rules and regs around stable coins, I I guess people kind of caught on to the fact that you need some of that in order to bring that into the mainstream and then it starts to become a little bit more on a par with the other forms of money. So I think that that's something that'll inevitably start to happen. Agree. And I don't know, I mean Friday was just was a very very short time ago, right? So I think the probably we still need to know the details of what happened. But but it was obviously a very sovereign reminder of what can happen in terms of concentration and and leverage when the when the markets do their thing. To your question, I don't know if CBDCs or tokenized deposits would have helped mitigate that in a first order. uh probably they would have in a second order in the sense that if you have more trusted collateral, you have more players in the market, you get more resilience built into the system and the fact that there is excessive centralization on a small number of exchanges or oracles or market makers exacerbates some of these tensions in the market. So in the if you are able to provide some of those instruments that are more widely accepted and more folks get into the system that provides a more resilient membrane that can absorb some of those shocks. So I I guess to summarize that that that kind of uh commentary. It sounds like you kind of all expect them to interact with each other, but stable coins will still remain the dominant the dominant payment rails within DeFi, but ultimately tokenized deposits might provide a a better second order kind of buffer to to make the on and off ramp much more feasible and interact with the stable coin, but stable coins themselves will still be the dominant form of of money. Yeah, I I I guess it goes a bit back to the point it's still very early in the innings, right? I mean you look some people are starting to experiment with this notion of can you move deposits tokenized deposits onto public blockchain. You know these are conversations which were not really prevalent last year. I guess they're starting to become more of a theme. But then you've got a you've got a lot of mechanics to work through as to how that how that fundamentally operates. But but there's no reason why some of that can't be projected into more open ecosystem so long as it's got the controls around it. So, um I wouldn't necessarily say that assumption is totally guaranteed that that could be tested. And some of these things are Lego bricks. I think that we we tend to see them as compartmentalized, but I don't see any conceptual reason why you wouldn't see a stable coin that has tokenized deposits or CBDCs as part of the reserve. So, there there are some and I don't see a lot of CBDC's who are considering being deployed on permissionless chains. So some of these things will will build on top of each other for sure. And one thing I would want to touch on just before we finish is just really um it's just really the issue of kind of fragmented liquidity. And so I think this is one of the the core things definitely when we talk to regulators. It's it's at the heart of the issue and and particularly prevalent in the UK when basically one of our only major industries left is banking. Uh and the the core business model of banks depends on basically front-end deposits. Um so how do we move forward uh in a way where we firstly aren't fragmenting liquidity in a way which is detrimental to end consumers and secondly how do we and this is maybe more of a question for the banks. How are the banks thinking about doing that in a way where their business model still can survive in in this ecosystem and and you know essentially their the spread that they earn as a as as a business model entails can can be you know continued in this environment. Maybe I'll start with um Ryan. Um so yeah I mean like everything I guess it's always an opportunity and a challenge for institutions but I I think um the idea and people have talked about it earlier in the day around collateral optimization uh intraday liquidity you know there are a number of firms who are looking to help solve that for for institutions and you look at the the banking sector at large it's it's no uh surprise to them that finding some of those growth Both levers are difficult. So optimizing is absolutely part of the name of the game, right? And reg requirements go up. Um, uh, categorizations change and so you've ultimately got to look at mechanisms for freeing that up. And so moving to a more instantaneous, uh, intraday type market is absolutely something that I think banks recognize can save them money, can save customers money. um that doesn't necessarily need to come at the expense of traditional models in the sense that there's no reason why you can't continue to leverage your distribution. See, you know, if you're freeing up collateral for you and clients and they're able to recycle that faster and use that more, then you know, no reason why that can't uh translate into to to more trades and you can still have your custody solution sitting behind that. So um I I think there's a lot to play for there rather than just assuming it's uh all doom and gloom from the perspective of the bank. Yeah. Yes. So I think uh fra liquidity fragmentation is not a new thing. I mean in even in today's traditional world right I often say today's financial ecosystem is like a patchwork on top of a c patchwork. there's so many different venues and liquidity places and sometimes we have to place liquidity uh at different places just to making sure we can do the settlement we can do the payment on time uh fulfill the customer requirements and without the delay or penalty so I think in this new world of tokenite deposit CBDC and stable coin etc etc uh we really need to making sure things in interoperable but uh it's not just a technology interoperable it should be a scheme team consortium collaboration interoperable uh I think from tokconite deposit perspective we are unlikely to see different type of tokenite deposit right if it's a UBS you have one type of tokenite deposits backlay one backlay tokenite deposits but I think I vary more on the stable coin size because we already see different type of stable coin issuers and in the coming years you probably going to see more and more so how do we making sure that so we do have we can still be in trouble in the stable coin space when have we will have different liquidity in the stable coin uh spaces and that the same applies to the crypto world as well. Yeah, absolutely agree with the point on liquidity. Uh I think it's exceedingly important and probably the way you you solve for that is through interoperability. The death of the fractional reserve system is a particularly it's a particular pet peeve of mine because I've been hearing that for 15 years. There is always something that is going to kill the fractional reserve system. 15 years ago, Fintex were going to kill the fractional reserve system and three years ago, private credit was going to kill the the fractional reserve system and now stable coins are going to kill the fractional reserve system. I don't think that's the case. If you look at it just purely from a scale point of view, there are probably 300 billion of stable coins out there. If you look at the US side, which is the market where I have probably the best perspective, it's anyone's guess, but probably 50 billion of stable coins are in the in the US at any point in time. that is not going to kill the the fractional reserve system and if if the regulator is concerned about it there are ways to address that. So there are there were comments from the Bank of England a while ago about potential limits on stable coins but more realistically you could just enable bank deposits as part of the reserve and then it flows through there. I don't think that anyone is thinking these days that the balance that consumers have on the revolute wallet or the PayPal wallet or the Vimma wallet is going to kill the fractional reserve system. So there are ways to manage to make sure that that doesn't happen. I can't remember if it's a Churchill quote, but the the news of my death has been grossly has been grossly over exaggerated or something like that. Um, just in the final 10 seconds, uh, you can't say all three. Uh, tokenized deposit, stable coins, CBDC's, your personal favorite, Jose, I like them both, but the stable coins and tokenized deposits are higher in my list. Shannon, I would say tokenized deposits, but everything will coexist in the future. and Ryan, I I'll plump for tokenized deposits. I am a banker after all. Brilliant. Well, thank you all very much and um and uh thank you for your insights and uh hope everyone got something from that. Thank you very much. Thank you.
Debate: Stablecoins vs. Tokenized Deposits vs. CBDC | DAS London 2025 | Day 2 | Institutional
Summary
Transcript
Well, hello folks and welcome to this this session. Um, today we're going to be talking about stable coins versus tokenized deposits and CBDC's. Um, but first, let's set the stage. Tokenization is reshaping how money itself exists and currencies that ictus means of value distribution in today's world has become a hot bed of innovation in something which can be quite boring. Um, so from stable coins to TDS to CBDC's, today we're going to unpack the the sticking points and some of the solutions that uh need to be addressed. Um, and ultimately our panelists are going to determine where they think value will reside. Um, by way of introduction, I'm Theo Golden. I'm a portfolio manager and I lead on tokenization at Bailey Gford. Uh, we're a UK asset manager, run about 300 billion of uh, dollars under under management. And uh to introduce our our top tier uh panelists, we've got Ryan Haywood, who's the head of digital assets and strategic investments at Barclay's uh one of the UK's biggest banks and oversees the bank's digital asset strategy. We've got Shannan Zo who leads UBS's strategy and execution around digital assets uh including initiatives in CBDC's uh digital isments and digital payments. And then we got uh Joseé Fernandez de Ponte where he's tasked uh driving the ecosystem growth as president of the uh the Stella Stella Foundation and scaling portfolio companies and expanding adoption. Um so really excited to to dig in. Um so maybe just to to start with a scene setter um I think if we're going to determine what's the best we should probably determine what the problem is, right? Um so that's maybe where we'll start. to run. What is the core problem you think digital forms of major currencies are trying to solve and who's it for? Is it settlement speed? Is it program uh programmability? Is it inclusion? Is it resilience? And do you think any of these one solutions solves it all? Um well, nice to nice to speak to you today. So, I think um they're all potentially solving for slightly different things. And so, I guess it depends a bit on form versus factor. So CBDC's I think are often touted for this financial inclusion point. I you know I think that that is maybe slightly tenuous depending on the jurisdiction but I absolutely get where they're you know significantly underbanked um sections of the population in certain jurisdictions or countries where you may see that come into uh come into its own. I think for something like um transferability or crossber payments, CBDC's are are a harder a harder axe to grind because I think you've ultimately got to get that coordination across a number of central banks and that is easier said than done to to get out of the gate. Um, something like programmability I think probably applies to all of them. And really that's just the foundational basis of trying to upgrade your capabilities of money. And as soon as you start to accept the fact that more more finance and assets are going to go onto chain and you're going to want um the ability to have a series of transactions or have DVP or PVP moving together, I think that programmability is sort of pretty fundamental to all aspects of it. But I do think something like um tokenized deposits occupy quite an interesting part in the ecosystem there. There may be slightly newer as banks are starting to think about this capability and how they roll that out to clients. It it definitely gives you the program programmability p piece. It um it potentially gives you that speed of settlement given you've got the existing two-tier structure and and traders already connected up to to most of the things you're going to need. the interoperability or crossber piece is harder to solve. Um and I think people recognize that but you know we've we've been working with a few of the banks around something called GBTD which was the RLN project and and again at least that's trying to trying to solve some of that interoperability at least within borders and then we know there are other um you know crossber onchain cache solutions which you can link up and start to provide some of the capability. So again, I think different for different uh form factors and therefore ultimately you see a plethora of solutions that will coexist. That's that's pretty helpful. I'm going to be slightly cheeky and bring Jose in. Um the easiest reaction to that is uh well Ryan, you're a banker. Uh so you'd want to say something along those lines. And Jose, I' maybe invite you to challenge and maybe give us a bit of a a more of a a DeFi angle or or maybe just, you know, are stable solving something which which the other two can't. I think they are, but and hopefully the next time that we do a panel like this, we're going to call it a stable coin sand tokenized deposits and and CBDC because they serve for different things. If you think about the types of money that are that are out there, there are essentially three types of money. There is central bank money, commercial bank money and then e- money and stable coins are basically tokenized e- money when deposit tokenized deposits are tokenized commercial bank money and CBDC's are tokenized central bank money. If you think of the stuff that you can do with the stable coins that people should think of stable coins as the money that you have in your fintech wallet, in your PayPal wallet or Venmo or Revolute, pick pick the one you want. But now all of a sudden you can use it everywhere and and those are things that are different than what you can do with tokenized deposits. Tokenized deposits are a fantastic instrument for interbank settlement. I struggle to see them as a payment instrument for retail. So what happens if I get if somebody pays me with a tokenized deposit from bank X and I want to liquidate that in country Y. How does that work? And if it is commercial bank money, it has counterparty risk for for that commercial bank. So they serve different purposes. I think that absolutely there is a space for tokenized deposits and there is a space for stable coin. The way that we think about the problem that we are trying to solve is access is access to financial services. Stellar has been around for about 10 years and the mission has always been to increase access to everyday financial services and in some cases we're going to use stable coins for that. There's a lot of work that has happened in remittances or dispersements for refugees where stable coins are the best tool for the job and there are going to be some other instances in which we will want to use or our ecosystem will want to use tokenized deposits and there is if there is a moment in which central banks are issuing real CBDC's and they choose to deploy them on permissionless blockchains we would love for them to deploy on Stellar too. And Shannon that's probably a good point to bring you in as Well, obviously you've done a huge amount on on CBDC's. Um, you know, to a lot of folks who are in the Trafy world, you know, it feels probably pretty familiar and and and we kind of can grasp it, but you know, for people who are more kind of cryptonative, it it can sometimes feel that, you know, it's a solution in search of a a problem. So, I guess what's like the core value ad? What's the core differentiator of of a of a CBDC? And and, you know, how can it deliver on that that promise of public trust? Yeah, that's a really good question. I think when we're looking at CBDC, we have to distinguish the different types of CBDC. So, you have the wholesale central bank digital currency, wholesale CBDC, which is actually the digital currency that we probably explored more deeply from the institution perspective. You also have the retail CBDC, retail central bank digital currency, for example, in the euro, digital euro is being given a lot of push by the by the politicians. So those type of retail CBDC probably more being used for the day-to-day use of yourself and myself potentially buy a cup of coffee or pay the train tickets. So uh when it come to the CBDC I think is I would not say it is a solution looking for problems. I I would rather say it is a solution that is targeted for different type of multiple different type of needs. Um so very concretely for the central banks or for a nation the central bank digital currency or even just the traditional uh central bank money that represent the sovereignty of a country uh it is the tool no matter in the current society or in the digital economy to really control and also to monitor to influence the financial stability and to allow the securities of this of the society and most importantly to create a trust anchor. This trust anchor matters for the day-to-day use and also matters for the financial economy and large institutions. So maybe give you two uh very concrete example where UBS is heavily involved in the CBDC initiatives. Um so I and I always just say okay in the when it comes to CBDC or central bank or digital currency look at the uh capital market and also look at the transaction banking. So from the uh transaction banking world or the correspondent banking uh experiment there's a very famous projects now led by the bank for international settlements the BIS uh joined force with seven central banks globally including the bank of England Swiss National Bank New York Fed etc etc. So UBS is one of the commercial bank joined this uh uh initiative together with another 40 plus commercial uh entities. So through this uh initiative what we are going to hopefully see is to how we how the tokenized central bank reserve in the wholesale space and the tokenized deposit of a commercial bank can be interoperable on a unified ledger or unified platform. By doing so we will have 247 faster and more efficient and cheaper crossber payments. So this is something that we want to achieve and we can only achieve by having the tokenized central bank reserve onchain as well because in today's world as much as we want okay you can cut off the correspondent bank from seven or 17 to two but ultimately when you have to do the settlement and then clearing between two institution central banks have to come to play. Um a second example I can quickly give you is in the capital market space. So UBS is also involved in the project Hisa which is the Swiss National Bank's initiative uh of using wholesale central bank digital currency and is a real wholesale central bank digital currency. It's not fake money or you know uh play money right it's a real money and uh to use this wholesale CBDC in the Swiss Frank to settle uh financial transactions including bond insurance etc. So why do I mention this? Because back in 2022 uh my team together with the Treasury colleagues, we already launched the tokenized uh digital bonds uh in the Swiss market 375 million. So back then we did have a digital payment rail but that was not a wholesale central bank digital currency. So we do have benefit from the efficiency from the speed of a tokenized bond issuance and the settlement on digital rail. But what we could not achieve is to reduce the credit risk down to zero intraday at least. So here comes the play of a central bank digital currency by the Swiss National Bank. So last year when we launched our another central bank uh another digital bond we were able to use the wholesale CBDC in Swiss Frank to settle our digital bonds. So that achieves the ultimate risk reduction uh for the wholesale financial institutions. So just want to share these two examples. That's those both both very helpful examples and I think it's kind of helpful also for us to to to ask the question because obviously we're kind of stuck in these kind of quite old school financial institutions particularly the three of us uh and and these can feel like kind of tangible examples uh in our kind of everyday work but it's often actually quite hard to think about that in terms of um in terms of just people on the on the street. What what does what does the benefit of having much more interoperability between commercial bank central uh commercial bank digital money and central bank digital money? What why why is that an improvement? Why is that better for Joe Blogs on the street rather than just kind of being a helpful liquidity feature and a gizmo for for our for our kind of incumbent digital uh incumbent banking organizations? Um so so valid question I guess the consumers always get a slightly warped I guess uh impression of how exactly that financial ecosystem is connected together and you know they in the UK you benefit from faster payment so everything looks pretty seamless and instantaneous. Obviously that's not quite true in the in the back end and that in itself brings costs which ultimately have to be uh have to be funded some way or another. I think um even when you look at something like faster payments infrastructure which is very helpful in terms of allowing that um seemingly instantaneous switching of of or payments from account to account within the UK. Um you know that is still legacy infrastructure. um there is a question of how do you you know how do you upgrade that what does that look like uh how costly will that be and so I think as you as you start to get onchain or funding financing moving to onchain solutions there's naturally a a jumping off point where you start to say well hold on should we not think about um what infrastructure we should be building in the 21st century and I think the UK Treasury has already set that task with things like their national payments vision you know, that's a bit of a call to arms both amongst the regulators but also some of the commercial players like the banks to start thinking through, you know, logically in some some sort of sequential fashion as to what you need to do to to build out or re rebuild some of the UK payment infrastructure. And I would think digital assets naturally fit into that. But I think it goes back to um to to the point one of the points made around um even even at the retail level if you want to go and transact with let's say securities that experience is still quite clunky. So even though maybe you can do accounttoount payments quite quickly when it comes to trading securities and you're trying to do DVP that still takes time because that goes through crest on the asset side that has its own settlement cycle. So as you start to see the sway of bringing assets on chain or tokenization if you want uh and that can marry up with digital cash you start to see all of that that that reduced down and then there are other use cases like again within the context of um GBTD a couple of the use cases that we're looking at which is effectively this interoperability of tokenized money between banks. Couple of them one is a peer-to-peer use case. So the idea again being well you've got account to account transactions amongst your peers or amongst uh other account holders. You don't necessarily know them. So let's say it's secondhand marketplaces um your um your gum trees or your Facebook marketplaces. How do you solve for that potential for fraud or for transactions that ultimately you're having to wire money but maybe you haven't received the goods. So there is potential capacity there to have locking capabilities which you can associate with programmable money. So that is potentially helpful. And then when you think of things like the mortgage journey which is another another interesting example you know trying to stitch up uh housing transactions very complicated. Uh if you've got let's say seven parties in a chain and you've got to go and fund into all of your conveyance accounts and then they've got to go and sequence all of those payments into someone else's accounts. uh you can easily get into cutoff times because your traditional infrastructure is not 247 uh it doesn't move on weekends etc. Um it'd be a lot potentially a lot easier if all of that money stays in the accounts and you can potentially lock that and say, "Okay, everyone can validate that all of this is here. It's all locked so it can't be used for alternative purposes, but as soon as everyone's done, you hit click and everything goes." And ideally that happens on the asset side or the property title deed. So, I I do think you'll actually see even though a lot of the benefits may sit ultimately on the wholesale side, I think retail um customers will start to see those benefits and piggyback of some of those infrastructure upgrades. Sha, did you have anything to add to that or um yeah, I think maybe just quickly uh u commenting from the retail side and of course UBS we do not operate retail banking outside uh Switzerland. Um but uh I think maybe just uh mention things like in the Swiss retail uh ecosystem, right? Uh we do have a very uh advanced platforms things like trends uh etc. already allow you to do very fast uh payments between the retail uh users. Um however I think they in the different nations we still start seeing as you said the instant payment being roll out in different countries. So uh what does that mean? It means for the utail retail user we do not necessarily need to pay to pay up to benefit from these services. However, if you look behind the scene, it is the bank like ourselves actually have to pay or have to build the infrastructure and have to actually also to preserve the liquidity to making sure we can really fulfill the 247 uh redemption requirements when our uh retail user needs. So I think they well why do the retail people need to care? because they need to care. This is all the cost that will eventually passing on no matter to themselves directly or from the different channel uh to the broader population. Yeah, maybe to add to that, one of the things that I found really really interesting when we're having conversations like this about use cases is sometimes the premise is a bit let me say reductive. I think that all of us we spend a ton of time in rooms where people are asking about the use case and I'm sure it happens with the audience as well. Say, hey, why do we need a stable coins if we can have tokenized deposits? Why do we need X if we have Y? And I think that in some cases is a fundamentally flawed question. So when when you look at from the regulatory point of view, I think it's important to keep in mind that the role of the regulator is to maintain financial stability and consumer protection is not to demand exante use cases because they're not there to gatekeep and vet the use case. The market will come up with a with a use case. And we've been in this game for long enough that it feels like we are starting to find out the granularity of the use cases. And I used to run a fairly large remittance business inside of PayPal. And the reason that we started to move that towards stable coin was not ideological. It was not for decentral decentralization was because it was better effects, faster settlement time, less counterparty risk. Uh but then two weeks ago, I was talking to someone who's a large asset manager who operates on the secondary market for non-performing loans. Their point of moving some of their flows into stable coin was time to cash and say, "Hey, it takes me two weeks to collect the money and then I need to go to the service agent and need to see which liability goes to whom." Their time was two weeks to two weeks faster cash to after collection. So all that granularity of the use case will come from the subject matter experts in each specific business and the people who are interacting with it every day. uh and I think that we are starting to move from the very plain vanilla that use cases that we used to talk hey this is going to be good for crossber payments and remittances we're go we have gone to the opposite extreme on hey this is very good for defi and and for programmatic lending and borrowing and now we are starting to find that space in the middle where people have accepted that this is here to stay and this is a technology that is getting to the point where enterprisegrade uh solutions can be put in case and it's going to be on all of us to find out what is the specific use case where it makes sense and in some cases maybe it will not make sense but I but I believe that in many it will maybe I can just uh just comment on that just to follow up what you have said right and also from the end user perspective no matter their retail people or they are corporate institution uh I often find that they do not want to take the burden of doing the integration and getting used to the new system or too many new different platforms so It's really the responsibility of ourselves to making sure this transition is as seamless as possible. Um uh just take some examples. I speak with our corporate and institutional treasurers very often because the token I deposit for example we're uh we're working on right at the moment is really at this first stage target for those audience right so from their perspective especially corporate treasurer um they normally do not have a large treasury uh operations team like like a bank right they have very limited capacity resource so for them to actually plug into a blockchain ecosystem or real is very difficult then they probably still using a little bit more how to say legacy treasury management system to doing their cash flow and the payments. So if we are now coming up with a new type of DT payment asking them to integrate is very difficult to sell the the gig. So I think it's really about how do we actually help those treasuries and uh no matter institution or corporates to do the intraday liquidity management a lot better and that I think also comes up with the new solutions like tokenized managing fund and that's a is completely different story we probably don't have to comment it today I mean that's that's an interesting one there especially around um so one of the core use cases we see is is around that treasury management function and particularly for kind of multinational companies which genuinely have are just archaic systems and it is it's a painful pro process. Um do you feel that uh particularly on the banking side and I'll start with Jose as maybe the challenger. Do you think the banks are moving fast enough to to build those solutions in a way which the tangible benefits are visible or do you think that there's a a slight kind of paradigm kind of taking place where the banks necessarily aren't moving quick enough to develop those solutions and folks are looking to stable coins because they want to they they see the end goal. they see the vision and they just want to deliver it now and right now and and here rather than waiting for their banking counterparties to catch up. So of course I I will always want the banks to move uh faster but also you need to remember that the banks are not there to move fast and break things are are there to move and make sure that nothing breaks. So there has been early adoption. You would expect the early adoption to happen in other places. The good thing of the banks is that when they start moving, it's very difficult. It's very difficult to get them to move, but it's also once they get moving, it's very difficult to make them stop. Uh, and you've seen probably that early the early adoption obviously was on crypto ecosystems. Then it was you saw the payment companies. I'm seeing a ton of activity on the asset management side and I'm seeing a ton of conversation around on banks especially around stable coins, less about the the RWA side. You want them to move faster of course but especially you want them to move decisively because you don't want I think that we are past the point of innovation theater and proofs of concept and that that's something that we had to go through but we are on the other side of it massive distribution will happen in the places where the retail and corporate consu customers are today and those are largely with the banks and the asset managers and the payments companies and as Yan was saying you need to make it easy for your client to say yes. They're not going to they will not have laser eyes. They're not going to care about decentralization for the sake of decentralization. So getting those distribution channels, you don't get to liquidity and distribution if it is not through the existing financial tapestry. So yeah, I would want them to move faster. I'm extremely happy that they are moving. Well, I can certainly say that two people are moving very quickly. We got them on the stage. I I just wanted to I wanted to ask uh maybe Ryan, I'll start with you. Um it feels like the conversation around stable coins particularly has moved really quickly in a very short amount of time despite a lot of us maybe talking for for for a while longer, but it's definitely come into the the hot bed of discussion. I've certainly been asked by more uh clients about stable coins than I than I have ever in the last six months. So, but I one of the questions we get asked a lot is the standards that have been set are they the final set of standards that we'll end up with in 5 years time. Do we think there is still a progress to towards a better and improving solutions? And and what does that look like? And and maybe I'll start with what Ryan had said. Um is there a second mover advantage for regulators like the UK to iterate and improve? Yeah, I think that's that's fair. So I agree the speed of change across stable coins has been pretty fast and we we know why that's that's happened. It's been a transformational year. Um as you said there hasn't necessarily been that guidance in place for a lot of a lot of jurisdictions. So that's just taking shape. Uh banks at the very least want to see where that lands and and I said that's not even the ink's not even dry yet. They've still got to be implemented. So there's there's still a process to go through for that. Um I think it's a relevant point you made about some you know something like mo going up first uh very helpful useful to to set some sort of standards um but obviously if the ground shifts from around you that can very quickly look like it's um slightly out of kilter with maybe the the direction of travel elsewhere. So the no doubt there may be recalibration of that at at some point. Um, I think your I think your point about um how how quickly that's starting to to move and it it's an interesting it's an interesting dynamic because you you've definitely got these pockets of DeFi system which can move at great pace. I mean still I think where stable coins are today versus where they will be in five years both the regs that may shape that will be quite different because I think regulators are unsurprisingly to a certain extent cautious and they want to see they want to understand the risk they definitely want to avoid unintended consequences of you know huge liquidity drains out of the traditional banking system or something like that or obviously dep peegging risks and and and those kinds of points. So understandably they they're slightly reluctant to just fully embrace it. But by the same token, I think stable coins are at the starting innings. So in in terms of, you know, what those things are used for um uh how they are how they moved around the globe, that's still very early stages, right? It hasn't even really permeated significantly out of the crypto space yet. um the infrastructure although there's been there has been some of this built you know the idea of to the distribution point the idea of getting stable coins into the traditional final financial ecosystem that's still in the process of being built out how do banks connect to this how do they accept it what do banks what is their role in the ecosystem are they going to manage reserves are they going to issue coins like the this is all happening at once and you've seen there various banks looking at different solutions They're obviously speaking to some of the existing private sector operators to try and work that out and it's all it's all ultimately happening real time. But I I think your ultimate uh working hypothesis that things will look quite different in a few years time is is a fair one. And I I guess one one thing I'm interested particularly in context of of this weekend uh which was you know sharp and painful for a lot of folks potentially at this conference. Um, something that I was thinking about it this morning was like would CBDC's or tokenized deposits been would would they have been a a help or a hindrance in in this kind of weekend's market activity and kind of by by parcel of that will we ever see something like a tokenized deposit which is truly interoperable with with DeFi um and truly actionable in the way that we want to use maybe as a broader ecosystem uh within decentralized finance. Maybe I'll start with Shannon. Yeah, I think uh um so a tokenized deposit I think at this moment I think is also at the early stage. Um most of the large banks today is exploring what to do. Uh and many of them now is coming to a stage to launch or already launched. Um but one big constraints of the token I deposit today is that u everything is only working within their own ecosystem. So like uh you can only send a tokenite deposit from one account to another account one client to another client within the same banking uh ecosystem in in uh instead of cross bank. So I think that is a challenge that all the large banks who are like myself working on the tokenizite deposits fully aware and wanting to address. So how do we actually address this this this issue? There's multiple ways to do so and of course you can always go off you know offchain and onchain offchain onchain to facilitate this if you have to send tokconite deposits to a part other parts of the world where your banking ecosystem is not stretched to um but then you can also using the other instrument for example if the likes of project agora went live then you will have a multilateral scheme to allow the money to go across the globe uh and uh yes stable coin and uh defy there's also bringing new possibilities, right? Because many people now assessing, okay, would a stable coin be they a good option for the last mile of a payment when the money need to go into a country, especially if that country is underdeveloped. Uh and uh when it comes to DeFi, I think it's also an interesting point because today we certainly see more stable coin and crypto being used in the D5 world instead instead of tokenized deposits. But we also know like the D5 players do use their traditional bank accounts to upload or to un uh um uh unramp their money into the D5 system. So I think it's a matter of what is the best user experience for the DeFi players to feel they can actually get the money into the system. But but I I guess the only other thing is obviously there is a little bit of a convergence that has to happen because while there hasn't been these rules and regs around stable coins, I I guess people kind of caught on to the fact that you need some of that in order to bring that into the mainstream and then it starts to become a little bit more on a par with the other forms of money. So I think that that's something that'll inevitably start to happen. Agree. And I don't know, I mean Friday was just was a very very short time ago, right? So I think the probably we still need to know the details of what happened. But but it was obviously a very sovereign reminder of what can happen in terms of concentration and and leverage when the when the markets do their thing. To your question, I don't know if CBDCs or tokenized deposits would have helped mitigate that in a first order. uh probably they would have in a second order in the sense that if you have more trusted collateral, you have more players in the market, you get more resilience built into the system and the fact that there is excessive centralization on a small number of exchanges or oracles or market makers exacerbates some of these tensions in the market. So in the if you are able to provide some of those instruments that are more widely accepted and more folks get into the system that provides a more resilient membrane that can absorb some of those shocks. So I I guess to summarize that that that kind of uh commentary. It sounds like you kind of all expect them to interact with each other, but stable coins will still remain the dominant the dominant payment rails within DeFi, but ultimately tokenized deposits might provide a a better second order kind of buffer to to make the on and off ramp much more feasible and interact with the stable coin, but stable coins themselves will still be the dominant form of of money. Yeah, I I I guess it goes a bit back to the point it's still very early in the innings, right? I mean you look some people are starting to experiment with this notion of can you move deposits tokenized deposits onto public blockchain. You know these are conversations which were not really prevalent last year. I guess they're starting to become more of a theme. But then you've got a you've got a lot of mechanics to work through as to how that how that fundamentally operates. But but there's no reason why some of that can't be projected into more open ecosystem so long as it's got the controls around it. So, um I wouldn't necessarily say that assumption is totally guaranteed that that could be tested. And some of these things are Lego bricks. I think that we we tend to see them as compartmentalized, but I don't see any conceptual reason why you wouldn't see a stable coin that has tokenized deposits or CBDCs as part of the reserve. So, there there are some and I don't see a lot of CBDC's who are considering being deployed on permissionless chains. So some of these things will will build on top of each other for sure. And one thing I would want to touch on just before we finish is just really um it's just really the issue of kind of fragmented liquidity. And so I think this is one of the the core things definitely when we talk to regulators. It's it's at the heart of the issue and and particularly prevalent in the UK when basically one of our only major industries left is banking. Uh and the the core business model of banks depends on basically front-end deposits. Um so how do we move forward uh in a way where we firstly aren't fragmenting liquidity in a way which is detrimental to end consumers and secondly how do we and this is maybe more of a question for the banks. How are the banks thinking about doing that in a way where their business model still can survive in in this ecosystem and and you know essentially their the spread that they earn as a as as a business model entails can can be you know continued in this environment. Maybe I'll start with um Ryan. Um so yeah I mean like everything I guess it's always an opportunity and a challenge for institutions but I I think um the idea and people have talked about it earlier in the day around collateral optimization uh intraday liquidity you know there are a number of firms who are looking to help solve that for for institutions and you look at the the banking sector at large it's it's no uh surprise to them that finding some of those growth Both levers are difficult. So optimizing is absolutely part of the name of the game, right? And reg requirements go up. Um, uh, categorizations change and so you've ultimately got to look at mechanisms for freeing that up. And so moving to a more instantaneous, uh, intraday type market is absolutely something that I think banks recognize can save them money, can save customers money. um that doesn't necessarily need to come at the expense of traditional models in the sense that there's no reason why you can't continue to leverage your distribution. See, you know, if you're freeing up collateral for you and clients and they're able to recycle that faster and use that more, then you know, no reason why that can't uh translate into to to more trades and you can still have your custody solution sitting behind that. So um I I think there's a lot to play for there rather than just assuming it's uh all doom and gloom from the perspective of the bank. Yeah. Yes. So I think uh fra liquidity fragmentation is not a new thing. I mean in even in today's traditional world right I often say today's financial ecosystem is like a patchwork on top of a c patchwork. there's so many different venues and liquidity places and sometimes we have to place liquidity uh at different places just to making sure we can do the settlement we can do the payment on time uh fulfill the customer requirements and without the delay or penalty so I think in this new world of tokenite deposit CBDC and stable coin etc etc uh we really need to making sure things in interoperable but uh it's not just a technology interoperable it should be a scheme team consortium collaboration interoperable uh I think from tokconite deposit perspective we are unlikely to see different type of tokenite deposit right if it's a UBS you have one type of tokenite deposits backlay one backlay tokenite deposits but I think I vary more on the stable coin size because we already see different type of stable coin issuers and in the coming years you probably going to see more and more so how do we making sure that so we do have we can still be in trouble in the stable coin space when have we will have different liquidity in the stable coin uh spaces and that the same applies to the crypto world as well. Yeah, absolutely agree with the point on liquidity. Uh I think it's exceedingly important and probably the way you you solve for that is through interoperability. The death of the fractional reserve system is a particularly it's a particular pet peeve of mine because I've been hearing that for 15 years. There is always something that is going to kill the fractional reserve system. 15 years ago, Fintex were going to kill the fractional reserve system and three years ago, private credit was going to kill the the fractional reserve system and now stable coins are going to kill the fractional reserve system. I don't think that's the case. If you look at it just purely from a scale point of view, there are probably 300 billion of stable coins out there. If you look at the US side, which is the market where I have probably the best perspective, it's anyone's guess, but probably 50 billion of stable coins are in the in the US at any point in time. that is not going to kill the the fractional reserve system and if if the regulator is concerned about it there are ways to address that. So there are there were comments from the Bank of England a while ago about potential limits on stable coins but more realistically you could just enable bank deposits as part of the reserve and then it flows through there. I don't think that anyone is thinking these days that the balance that consumers have on the revolute wallet or the PayPal wallet or the Vimma wallet is going to kill the fractional reserve system. So there are ways to manage to make sure that that doesn't happen. I can't remember if it's a Churchill quote, but the the news of my death has been grossly has been grossly over exaggerated or something like that. Um, just in the final 10 seconds, uh, you can't say all three. Uh, tokenized deposit, stable coins, CBDC's, your personal favorite, Jose, I like them both, but the stable coins and tokenized deposits are higher in my list. Shannon, I would say tokenized deposits, but everything will coexist in the future. and Ryan, I I'll plump for tokenized deposits. I am a banker after all. Brilliant. Well, thank you all very much and um and uh thank you for your insights and uh hope everyone got something from that. Thank you very much. Thank you.