Caitlin Long says tokenized securities are dragging banks into tokenized deposits, and predicts stablecoins get squeezed out "I switched from working on tokenized securities to tokenized dollars, because to me, until we have a tokenized dollar, you're not going to have the real benefits of tokenized assets, including securities,... commodities, derivatives, loans. Until you can settle the dollar leg in a tokenized form." "The tokenized securities piece is dragging the banking industry into the tokenized dollar piece. And my prediction, this will be controversial in the crypto space, is that tokenized deposits will squeeze out stablecoins, because there's just so much more liquidity behind them." "Tokenized deposits access the entire liquidity of the banking system as a whole, and all the network effects of the banks being networked in the back end of their back offices already. Granted, it's not 24/7." "I had a prep call for a tokenized deposits versus stablecoins panel at the Philadelphia Fed, where the bank folks assumed I was going to be rah-rah stablecoins. I came out and said I think tokenized deposits are going to elbow out stablecoins in velocity and volume over time. It shocked the bankers to hear somebody perceived to be a crypto person saying that."show more

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Stablecoins proved people want digital dollars. Tokenized deposits may prove banks finally noticed why.

Banks may win volume, not permissionless access

I tried to act normal about today and failed immediately. I don't need anything else from this moment.

Stablecoins getting squeezed out theory kinda wild but not totally crazy tbh

makes sense honestly, why build new rails when the existing ones already have all the network effects baked in

how stablecoin heavy is your portfolio rn?

Tokenized deposits competing with stablecoins is a really interesting angle. If banks can bring their existing liquidity and settlement rails onchain, stablecoins may face a much bigger challenge than most of crypto expects.

if tokenized deposits win it's because banks already solved the compliance and books side. stablecoins never had to until now

The strangest part is that this morning made the whole struggle feel worth it. The clue was so simple that I nearly missed it again.

So... ...self-custody of a "tokenized deposit" is more constrained than self-custody of a public stablecoin. At least one difference is that the banking institution must grant permission to whoever holds the tokenized deposit - so it is still a creature of the walled gardens that banks have established since the beginning of time. I'm sure there will be some "tokenized deposit coins" that have different characteristics (and some may even be able to mimic stablecoins), but it sounds to me more like a "CBDC-lite coin" than a stablecoin because it doesn't exist inside the holder's digital wallet as a bearer asset that is free from external influence and programming controls. This being the case, it is only a matter of time before the long arm of the state reaches into the banks and makes ALL "tokenized deposit coins" into a CBDC. She's probably right, but I don't have to like it...