BIS Vice President: How to Utilize Tokenization for Deposits

Editor's Note: This news was published on the National Clearing House website and is a transcript of a speech by Ms. Andréa M Maechler, Vice President and Acting Head of the BIS Innovation Centre, delivered at the Singapore Fintech Festival on November 12, 2025. This article was translated by the Asia Pacific Institute for Future Finance.. The full text of the speech is as follows: Tokenization challenges our understanding of money, promising a major leap forward in how the financial system operates. Understanding the technology behind tokenization, and the opportunities and risks it presents, is crucial. Tokenization introduces the possibility of creating two distinct worlds: private permissioned platforms, regulated and governed by trusted entities; and public permissionless platforms, operating in an open, decentralized environment with limited regulation and greater risks. The latter is largely uncharted territory, requiring comprehensive and solid analysis to understand how these different worlds can coexist. As the guardian of the financial system, the central bank is responsible for ensuring that the monetary system keeps pace with technological advancements and protects its most valuable asset: trust in money. Today, the characteristics constituting monetary trust and financial stability are closely linked to the role of deposits. In the future, tokenization promises to extend the advantages of time-tested systems into a tokenized, programmable world, benefiting the broader economy. Good afternoon. It is a great honor to celebrate the 10th anniversary of the Singapore Fintech Festival with you all. This year's theme, "The Technological Blueprint for the Next Decade of Finance," is perfectly fitting. In a world of rapid technological change, innovation is reshaping financial services. In recent decades, we've achieved digitalization. In the next decade, we'll see tokenization. Distributed ledger technology (DLT)—and more broadly, tokenization—not only challenges our understanding of money; they promise another major leap forward in how the financial system operates. Today, financial transactions are recorded in ledgers of electronic accounts, centrally updated by trusted intermediaries. Tokenization creates digital tokens representing assets residing on programmable, decentralized platforms, promising to expand the diversity of economic arrangements, much like the shift from cash to electronic money. But technology is rarely just about technological change; it's about pushing new boundaries. In the case of tokenization, one such new frontier is the possibility of creating new types of programmable money and assets. Understanding the technology behind tokenization, and the opportunities and risks it presents, is crucial. For central banks, as guardians of the financial system, the monetary system must keep pace with technological advancements and maintain its most valuable asset: trust in money. This requires identifying the fundamental principles that foster trust and stability, and understanding how these principles translate into a tokenized ecosystem. Looking ahead, let me step back and re-examine the foundations of today's financial and monetary system. At the heart of the financial system is a two-tiered architecture. This system combines the strengths of central banks as guarantors of monetary trust and financial stability with the strengths of financial institutions as private money issuers to meet the credit needs of the private sector. Let me illustrate this with a highly stylized image. The traditional two-tier system today provides a clear allocation of roles among the central bank, financial institutions, and the private sector. (Figure 1) At the core of the system (the inner red circle in Figure 1), the central bank issues and provides central bank money in the form of cash (outer layer shown as C), and provides reserves (core layer shown as R) available only to commercial banks. Central bank money is then made available to the public through banks. In some jurisdictions, certain regulated non-bank institutions may also hold reserves. Central banks are crucial for maintaining confidence in money. They achieve this in three ways: (i) by safeguarding the purchasing power of money through monetary policy; (ii) by maintaining financial stability through appropriate regulation and oversight (and their role as lender of last resort), ensuring the long-term sustainability of money; and (iii) by ensuring that money is available for payment when needed through the regulation of payment systems and the operation of wholesale payment systems. Depository institutions such as commercial banks provide credit to the private sector by issuing private money (middle layer D in Figure 1). They do this by crediting it to depositors' accounts. These deposits can then be used for payments in the real economy (outer layer in Figure 1). In this sense, banks act as the interface to the real economy, providing credit to households and businesses and determining economic conditions. Key Characteristics of Deposits

Trust in monetary and financial stability is a fundamental characteristic of a sound and dynamic economy and financial system. Without this trust, no economy can thrive. Today, the characteristics that underpin monetary trust and financial stability are also closely linked to the role of deposits (see Figure 2).

Key Characteristics of Deposits

Trust in monetary and financial stability is a fundamental characteristic of a sound and dynamic economy and financial system. Without this trust, no economy can prosper. Today, the characteristics that underpin monetary trust and financial stability are also closely linked to the role of deposits (see Figure 2).

Key Characteristics of Deposits

Key Characteristics of Deposits

Trust in monetary and financial stability is a fundamental characteristic of a sound and dynamic economy and financial system. Without this trust, no economy can prosper. ...Trust in monetary and financial stability is a fundamental characteristic of a sound and dynamic economy and financial system. Without this trust, no economy can prosper.

Figure 5

Tokenized ecosystems also need seamless integration into existing financial systems. This is because the financial value of assets is highly correlated with the ability of economic agents to convert these assets into credible currency, regardless of the underlying technology. This convertibility requires more than just technological connectivity; it requires merging fundamentally different worlds: integrating real-time tokenization platforms with existing systems built for wholesale settlement, and harmonizing account-based architectures with decentralized ledger environments. This means a redesign of infrastructure and operational processes. To support financial integrity, the BIS Innovation Centre, in collaboration with the Monetary Authority of Singapore and other central banks, is exploring how to extend the programmable compliance of digital assets to the “Mandala Project.” What about other tokenization tools? Distributed ledger technology and tokenization bring an interesting technological paradigm shift: the same technology can be used to create completely different worlds. Importantly, these worlds may not be easily traversed. This is important from a trust perspective, as tokenization may open the door to new types of currencies, such as stablecoins. But to truly be considered money, these tokenized tools must ensure that they meet the requirements of singleness and integrity of currency to maintain public trust and financial stability. To assess these properties, it is important to examine them from the perspective of the world in which tokenization tools exist. DLT Technology, A Different World The different worlds (or platform types) that DLT technology can create differ along two key dimensions (Figure 6): the public/private dimension, which defines access to the platform (private is restricted, public is open to anyone); and the permission/no permission dimension, which defines the degree of control or permission over operations on the platform. A DLT Technology, Different Worlds Figure 6 For simplicity, I will focus on two quadrants—the private permissioned world in the top left and the public permissioned world in the bottom right. Today, tokenized deposits are typically issued through “private permissioned” ledgers. This is a DLT ledger (or ledger network) designed, operated, owned, and managed by banks. Access is limited to invited participants, the DLT ledger is operated by a group of well-known and trusted operators, has a clear accountability framework, and is equipped with safeguards and regulatory controls. In this sense, private permissioned networks operate in the middle layer of Figure 5. In contrast, crypto assets and the vast majority of stablecoins run on “public permissionless” ledgers. These DLT ledgers are open networks maintained and operated by a group of unknown participants who coordinate their operations through consensus protocols. While this open and decentralized architecture fosters novel innovation, it also reflects a very different world—one where new risks exist, transactions are accessible to everyone, and there are no clear operators or central regulators. Misdesigned systems are difficult to reverse, code vulnerabilities can have systemic consequences, and accountability (and responsibility allocation) during cyberattacks may be unclear. Those considering permissionless releases on public platforms must be mindful of the risks to ensure security, trust, and resilience. In some cases, safeguards and workarounds, such as compliance, can be embedded within smart contracts or the technology stack itself. However, ultimately, a well-functioning ecosystem is more than just high-quality technology. Its robustness depends on its governance. How governance operates in the context of public permissionless platforms is not yet fully understood. In contrast, financial market infrastructure and systems in two-tiered systems are typically managed and operated by authorized and regulatory entities, meaning they can be connected to the core (the first layer in Figure 7). Currently, unregulated stablecoins are on the outer layer. Whether this will change over time in jurisdictions with robust stablecoin regulatory frameworks remains to be seen. Building a world that issues a particular form of currency is important. This brings us back to a key characteristic of trust money: the unity of money, meaning the ability to exchange private currencies unconditionally. Historically, unity has been achieved through interbank deposit swaps, with deposits settled into central bank reserves (i.e., connecting the middle layer to the core in Figure 7). In a world where tokenized deposits operate on private permissioned platforms, central banks are actively exploring options for creating such links, including settling tokenized reserves within the platform via traditional RTGS systems or settling reserves outside the platform via traditional RTGS systems. Building a world that issues a particular form of currency is important—especially in the context of trust money. Figure 7. So, how can singleton be achieved in a public permissionless DLT platform (or a stablecoin issued on such a platform) that is still in the outer layer of a two-layer system, as shown in Figure 7? This is still a new area that requires comprehensive and rational analysis to understand under what conditions platforms from different worlds can be integrated into a vibrant and dynamic tokenized ecosystem. Conclusion The future may not belong to any one form of money, just as it never has. It may belong to the range from cash to digital currencies. Looking ahead to the next decade of finance, tokenization represents a transformative innovation. We need to embrace the opportunities of tokenization while proactively addressing the risks and providing strong technological and policy safeguards. As technology is fundamentally changing the structure of our monetary and financial systems, we must uphold the importance of monetary trust and reaffirm our commitment to inclusivity, resilience, and the integrity of the financial system. Tokenization is not about discarding what works. Through tokenization, we can bring the strengths of today's systems into a tokenized, programmable world that benefits society and the wider economy. We call on central banks, regulators, financial institutions, and industry to work together to support the transition to a safe, efficient, and inclusive financial system that allows tokenized and non-tokenized currencies and assets to interact securely and efficiently, addressing key challenges and fulfilling the promise of monetization. The Bank for International Settlements is committed to acting as a convener and catalyst for global innovation, working with central banks, regulators, standard setters, banks, and industry.