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Money, Banking, and Financial Markets
Our new CEPR Policy Insight examines how three key technological innovations—blockchains, distributed ledgers, and tokenization—could reshape the future of finance. We review the current state of the crypto ecosystem, including its internal payments infrastructure, legitimate and illicit uses, and the reasons why crypto has failed to gain traction as a mainstream payments tool. We then turn to U.S. policymakers’ efforts to promote a “payments stablecoin,” considering the goals of an efficient and safe payments system and the barriers that stand in the way. Finally, we compare stablecoins with tokenized deposits and money market funds that replicate familiar financial assets in digital form but have received far less policy attention. We conclude that stablecoins are unlikely to compete effectively outside the crypto world against these no-less-digital instruments.
The Trump Administration is taking steps to integrate crypto into traditional finance, most notably the GENIUS Act’s establishment of a regulatory regime for “payment stablecoins.” To assess stablecoins’ likely impact on the future of payments, we compare them against a potential competitor that adds programmability and the potential for instant, low-cost cross-border settlement to a well-established bank product: tokenized deposits. Faced with crypto entrants in traditional financial services, the largest banks have powerful incentives to innovate, with the goal of maintaining and expanding their market share.