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Between Stablecoins and CBDCs: The New Role of Banks in the Digital Money System

1. The Third Way: Between DeFi Risk and Central Bank Utopia

While CBDCs are still surviving on PDF-based pilot projects and stablecoins linger in regulatory grey zones, banks are quietly building their own version of digital money - and calling it: the Crypto Deposit Token. At first glance, it sounds like a checking account with a blockchain sticker slapped on. But look closer, and you might see the quiet rise of a new kind of digital payment promise - backed by a banking license, but without a trace of decentralization.
That might be a good thing. Or a dangerous one. Probably both.

2. What Are Crypto Deposit Tokens?

Crypto Deposit Tokens - or CDTs - are tokenized bank deposits. Sounds unimpressive? That’s because, technically, it is. They’re simply digital representations of demand deposits held at a regulated bank and issued on a blockchain. No fancy algorithmic design, no Magic Internet Money. Just a programmable, auditable, theoretically 24/7-accessible claim on fiat.

The key difference from stablecoins lies in the details: while USDC, Tether & Co. operate through trust structures and often outside of traditional banking rails, CDTs are embedded directly within bank balance sheets. They carry the issuer risk of a licensed bank - not a FinTech registered somewhere in the Bahamas.

That makes them more regulated, more trustworthy - but also more controlled. There’s little decentralization here. And that’s very much by design.

3. Why This Suddenly Matters

The idea of tokenized deposits drifted through regulatory PDFs and academic papers for years. But now, things are getting real - not by startups, but by heavyweights: JP Morgan with JPM Coin, UBS with tokenized bonds, BIS-led pilots in Singapore and Europe. The market is sending a clear signal: we need a digital payment asset that’s trustworthy, instantly settleable, and compliance-ready.

Tokenized assets are already a reality - bonds, fund shares, even real estate. What’s missing is the matching settlement asset. That’s where CDTs come in: legally sound, bank-issued tokens that integrate directly with smart contracts and on-chain financial flows.

Put simply: if you want to settle securities on-chain, you’ll eventually need money that moves there too - without relying on Tether or waiting for the ECB.

4. The Risks - Familiar, Just Tokenized

If your mind jumps straight to transparency, security, and innovation when you hear “blockchain,” it’s worth hitting pause. Many of the risks around CDTs are neither new nor particularly “crypto” - they’re just more elegantly packaged.

First and foremost: counterparty risk. CDTs are not central bank tokens; they are claims against a commercial bank. If the issuer fails, not even the most elegant smart contract will save you. Then there’s fragmentation: if every bank issues its own token, you’re left with a patchwork of liquidity pools and incompatible systems.

And then there’s control. CDTs are regulated - exactly as much as the issuing bank and the law decide. Whitelists, blacklists, admin keys - all fair game. When someone calls this “DeFi-compatible,” they usually mean “KYC-friendly, censorable, and fully reversible.”

In other words: CDTs aren’t DeFi - they’re a digital layer for existing power structures. Whether that’s a bug or a feature depends on your worldview.

5. CBDCs vs. CDTs vs. Stablecoins - Who Wants What?

Some want control, others trust, and a few just want transaction fees. Welcome to the three-way tug-of-war over the future of digital money.

CBDCs come from central banks - slow, political, burdened with expectations. They’re supposed to make money safer, fairer, more transparent. At least, that’s the brochure. In practice: trial, error, and a side dish of geopolitics.

Stablecoins are fast, global, efficient - and a regulatory headache. Behind USDT, USDC, or FRAX are companies whose books you either don’t know or don’t want to know. Yet they work - arguably better than anything a public institution has produced so far.

And then there are CDTs - the well-groomed middle ground. Issued by banks, tightly controlled, fully retractable, and neatly regulated. They promise a digital future without disrupting the institutions of the past. No surprise regulators feel more comfortable with them than with a stablecoin out of Bermuda or a privacy-skeptical ECB pilot.

Bottom line: If you understand CDTs, you understand how the financial system is trying to reinvent itself - without actually changing too much.

6. Use Cases - Where It Gets Interesting

Nice theory - but where are CDTs actually useful? Surprise: pretty much anywhere Excel sheets, fax machines, or T+2 settlements are still considered normal.

In capital markets, CDTs can enable true delivery-vs-payment for tokenized bonds or funds - no clearinghouse, no 72-hour risk window. For corporates, they offer a new layer for automated treasury workflows: FX swaps, dynamic cash pooling, or on-chain factoring can all run rule-based and traceable.

Even in the world of Real-World Assets (RWAs), CDTs could become foundational. Tokenized property, credit, or receivables are of limited use if the money leg is still analog. CDTs fill that gap - with regulatory clarity and on-chain compatibility.

And then there’s DeFi: if protocols want to onboard institutional capital, they’ll need payment assets that don’t freak out compliance teams. CDTs could be the “DeFi with a seatbelt” solution - not decentralized, but interoperable enough to attract capital beyond the crypto-native world.

7. Conclusion - Between the Illusion of Control and a Real Opportunity

Crypto Deposit Tokens aren’t hype - they’re the logical outcome of a financial system that wants to go digital without reinventing itself. They offer efficiency, programmability, and regulatory integration. But they also carry forward the legacy of traditional banking - just with cleaner UX.

If you talk about innovation here, you have to talk about power. CDTs don’t change the game - they just shift the playing field. From paper cash to wallets, from bank accounts to smart contracts. But with the same players still in charge.

Will that be enough to fulfill the promises of digital money? Probably not. But it might be exactly what the market wants: trust with a refund policy. Digital, but reversible. Smart, but supervised.

It may not be the future of money.
But it just might be the future of payments infrastructure.
And sometimes, that’s almost the same thing.

FAQ

Currently, usage in open DeFi protocols is nearly impossible. CDTs are subject to regulatory constraints such as whitelisting, KYC, or blacklisting mechanisms, which are incompatible with the open, permissionless architecture of classical DeFi protocols. The main risk lies in the lack of composability: holders of CDTs are confined to a few, often closed ecosystems and cannot deploy them as flexibly as USDC or DAI.

Only under certain conditions, such as through OTC desks or specialized platforms, if permitted by regulation. A direct, permissionless swap on a DEX is currently not available. The primary risk is limited liquidity: CDT holders bear the conversion risk, especially during periods of market stress when fiat redemption or stablecoin swaps may become difficult or unavailable.

The current scope is limited: CDTs are primarily suited for settlement in private networks, corporate treasury flows, or regulated token marketplaces. For mainstream DeFi users, the utility remains low. The risk lies in overestimating on-chain capability, and underestimating how narrow CDT infrastructure usage still is compared to established stablecoins.

Yes. Since CDTs are directly linked to a regulated bank account, every transaction is identifiable. KYC and AML obligations apply, enabling full traceability. The risk for users: loss of privacy, potential regulatory intervention (domestic or cross-border), and data exposure in audits or legal disclosures.

CDTs are claims against a bank, not independent digital assets. In case of insolvency, there is a risk that redemption in fiat becomes impossible. While some jurisdictions offer deposit insurance schemes, it is often unclear whether and how these apply to tokenized claims. In the worst-case scenario, a total loss is possible, especially in systemic banking crises.

Yes. At present, each bank is developing its own infrastructure, with no common standards or bridging protocols in place. This results in fragmented token ecosystems with low network efficiency. The risk: reduced liquidity, limited scalability, and the emergence of “closed islands” with no real market integration.

CDTs operate at the intersection of banking law, payments regulation, and token governance. Depending on the jurisdiction, legal interpretation, oversight, and enforceability may vary. The risk lies in regulatory opacity: shifts in legal frameworks or restrictive rulings can significantly impact the usability and legality of CDTs.

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