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Crypto for Advisors: banks and digi
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Crypto for Advisors: banks and digi
Crypto for Advisors: banks and digital money
Crypto for Advisors: banks and digital money
Banks are embracing stablecoins and tokenized deposits as a means to upgrade their financial infrastructure, but they are approaching the two technologies differently.
By Sam Boboev|Edited by Sarah Morton
Jan 29, 2026, 4:00 p.m.
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What to know:
You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.
In today’s newsletter, Sam Boboev, founder of Fintech Wrap Up, looks at how banks are embracing stablecoins and tokenization to upgrade banking rails.
Then, Xin Yan, co-founder and CEO at Sign, answers questions about banks and stablecoins in Ask an Expert.
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-Sarah Morton
From stablecoins to tokenized deposits: why banks are reclaiming the narrative
Stablecoins dominated early digital money discourse because they solved a narrow technical failure: moving value natively on digital rails when banks could not. Speed, programmability and cross-platform settlement exposed the limits of correspondent banking and batch-based systems. That phase is ending. Banks are now advancing tokenized deposits to reassert control over money creation, liability structure and regulatory alignment.
This is not a reversal of innovation. It is a containment strategy.
Stablecoins expanded capability outside the banking perimeter
Stablecoins function as privately issued settlement assets. They are typically liabilities of non-bank entities, backed by reserve portfolios whose composition, custody and liquidity treatment vary by issuer. Even when fully reserved, they sit outside deposit insurance frameworks and outside direct prudential supervision applied to banks.
The technical gain was real. The structural consequence was material. Value transfer began to migrate beyond regulated balance sheets. Liquidity that once reinforced the banking system started pooling in parallel structures governed by disclosure regimes rather than capital rules.
That shift is incompatible with how banks, regulators and central banks define monetary stability.
Tokenized deposits preserve the deposit, change the rail
Tokenized deposits do not introduce new money. They repackage existing deposits using distributed ledger infrastructure. The asset remains a bank liability. The claim structure remains unchanged. Only the settlement and programmability layer evolves.
This distinction is decisive.
A tokenized deposit sits on a regulated bank balance sheet. It remains subject to capital requirements, liquidity coverage rules, resolution regimes and — where applicable — deposit insurance. There is no ambiguity about seniority in insolvency. There is no reserve opacity problem. There is no new issuer risk to underwrite.
Banks are not competing with stablecoins on speed alone. They are competing on legal certainty.
Balance-sheet control is the core issue
The real fault line is balance-sheet location.
Stablecoins externalize settlement liquidity. Even when reserves are held at regulated institutions, the liability itself does not belong to the bank. Monetary transmission weakens. Supervisory visibility fragments. Stress propagates through structures that are not designed for systemic loads.
Tokenized deposits keep settlement liquidity inside the regulated perimeter. Faster movement does not equal balance-sheet escape. Capital stays measurable. Liquidity remains supervisable. Risk remains allocable.
This is why banks support tokenization while resisting stablecoin substitution. The technology is acceptable. The disintermediation is not.
Consumer protection is not a feature, it is a constraint
Stablecoins require users to assess issuer credibility, reserve quality, legal enforceability and operational resilience. These are institutional-level risk judgments pushed onto end users.
Tokenized deposits remove that burden. Consumer protection is inherited, not reconstructed. Dispute resolution, insolvency treatment and legal recourse follow existing banking law. The user does not become a credit analyst by necessity.
For advisors, this difference defines suitability. Digital form does not override liability quality.
Narrative reclamation is strategic, not cosmetic
Banks are repositioning digital money as an evolution of deposits, not a replacement. This reframing recenters authority over money within licensed institutions while absorbing the functional gains demonstrated by stablecoins.
The outcome is convergence: blockchain rails carrying bank money, not private substitutes.
Stablecoins forced the system to confront its architectural limits. Tokenized deposits are how incumbents address them without surrendering control.
Digital money will persist. The unresolved variable is issuer primacy. Banks are moving to close that gap now.
-Sam Boboev, founder, Fintech Wrap Up
Ask an Expert
Q. Banks are increasingly framing stablecoins not as speculative crypto assets, but as infrastructure for settlement, collateral and programmable money. From your perspective, working on blockchain infrastructure, what’s driving this shift inside large financial institutions, and how different is this moment from earlier stablecoin cycles?
A. The meaningful distinction between a stablecoin and traditional fiat is that the stablecoin exists on-chain.
That on-chain nature is precisely what makes stablecoins interesting to financial institutions. Once money is natively digital and programmable, it can be used directly for settlement, payments, collateralization and atomic execution across systems, without relying on fragmented legacy rails.
Historically, we’ve seen concerns around stablecoins focused on technical and operational risk, such as smart contract failure or insufficient resilience. Those concerns have largely faded. Core stablecoin infrastructure has been battle-tested across multiple cycles and sustained real-world usage.
Technically, the risk profile is now well understood and often lower than commonly assumed. The remaining uncertainty is predominantly legal and regulatory rather than technological. Many jurisdictions still lack a clear framework that fully recognizes stablecoins or CBDCs as first-class representations of sovereign currency. This ambiguity limits their adoption at scale within regulated financial systems, even when the underlying technology is mature.
That said, this moment feels structurally different from earlier cycles. The conversation has shifted from “should this exist?” to “how do we integrate it safely into the monetary system?”
I expect 2026 to bring significant regulatory clarification and formal adoption pathways across multiple countries, driven by the recognition that on-chain money is not a competing asset class, but an upgrade to financial infrastructure.
Q. As banks move toward tokenized deposits and on-chain settlement, identity, compliance and verifiable credentials become central. From your work with institutions, what infrastructure gaps still need to be solved before banks can scale these systems safely?
A. For these systems to run naturally, we have to match the speed of compliance and identity with the speed of the assets themselves. Right now, settlement happens in seconds, but verification still relies on manual work. The first step to solving this isn't decentralization. It is simply getting these records digitized so they can be accessed on-chain. We are already seeing many countries actively working to move their core identity and compliance data onto the blockchain.
In my view, there is no single "gap" that, once closed, will suddenly allow everything to scale perfectly. Instead, it is a process of fixing one bottleneck at a time. It is like a "left hand pushing the right hand" forward. Based on our discussions with various governments and institutions, the immediate priority is turning identity and entity proofs into electronic formats that can be stored and retrieved across different systems.
Currently, we rely too much on manual verification, which is slow and prone to errors. We need to move toward a model where identity is a verifiable digital credential. Once you can pull this data instantly without a human having to manually check and verify a document, the system can actually keep up with the speed of a stablecoin. We are building the bridge between the old way of filing paperwork and the new way of instant digital proof. It is a gradual improvement where we fix each short plank in the barrel until the whole system can hold water.
Q. Many policymakers now talk about stablecoins and tokenized deposits as payment infrastructure rather than investment products. How does that reframe the long-term role of stablecoins as banks increasingly place them alongside traditional payment rails?
A. The future of the world is going to be completely digitized. It does not matter if you are talking about dollar-backed stablecoins, tokenized deposits or central bank digital currencies. In the end, they are all part of the same thing. This is a massive upgrade to the entire global financial system. Reframing stablecoins as infrastructure is a very positive move because it focuses on removing the friction that slows down the movement of assets today.
When we work on digital identity systems or nation-level blockchain networks, we see it as a necessary technical evolution. In fact, if we do our jobs well, the general public should not even know that the underlying system has changed. They will not care about the "blockchain" or the "token." They will simply notice that their businesses run faster and their money moves instantly.
The real goal of this reframe is to speed up the turnover of capital across the entire economy. When money can move at the speed of the internet, the whole engine of global trade starts to run more efficiently. We are not just creating a new investment product. We are building a smoother road for everything else to travel on. This long-term role is about making the global economy more fluid and removing the old barriers that keep value trapped in slow, manual processes.
-Xin Yan, co-founder and CEO, Sign
Keep Reading
- Fidelity Investments is launching the Fidelity Digital Dollar (FIDD), a U.S. dollar-backed stablecoin, in early February 2026 to support 24/7 institutional and retail on-chain settlements.
- The U.K. government says it expects banks to treat crypto businesses fairly as part of its push to make the country a global hub for digital assets.
- The U.S. Senate Agriculture Committee has scheduled its markup on crypto market structure for January 29.
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