The future of digital money may not belong to stablecoins after all.

While stablecoins have emerged as one of the fastest-growing segments of the cryptocurrency market, a growing debate among policymakers and financial institutions suggests that tokenized bank deposits could eventually eclipse them, reshaping how digital payments and financial transactions are conducted over the next decade.

That debate came into sharp focus at a financial conference in Croatia on Sunday, where Bank of England policymaker Megan Greene argued that tokenized deposits, rather than stablecoins, are likely to become the dominant form of digital money.

“I think tokenized deposits are probably going to take over from stablecoins and five years from now, I suspect we might wonder why we were talking about stablecoins,” Greene said.

There has been a growing divide among regulators and central bankers over the future architecture of digital finance, particularly as governments, commercial banks, and technology firms race to develop alternatives to traditional payment systems.

The debate hangs on three competing forms of digital money: stablecoins, central bank digital currencies (CBDCs), and tokenized bank deposits.

Stablecoins are privately issued digital tokens, typically backed by assets such as U.S. Treasury securities or cash reserves, designed to maintain a stable value. They have become increasingly popular for payments, cross-border transfers, and cryptocurrency trading.

Tokenized deposits, by contrast, are digital representations of traditional bank deposits issued directly by commercial banks on blockchain-based networks. Because they remain liabilities of regulated banks, proponents argue they combine the efficiency of blockchain technology with the safety and regulatory protections of the existing banking system.

Greene believes commercial banks have been slow to embrace tokenized deposits largely because they fear losing lucrative fee income and disrupting existing business models.

“Digital deposits haven’t taken off because commercial banks don’t want to lose the fees,” she said. “But they’re going to lose them anyhow and when they realize this, they will put more effort into developing these.”

Major lenders in Europe, the United States, and Asia have accelerated experiments with tokenized deposits as they seek to modernize payment infrastructure while retaining customer funds within the banking system. The issue has become important because stablecoins are increasingly viewed as a potential threat to banks’ traditional deposit base.

If consumers and businesses begin holding significant portions of their cash in stablecoins rather than bank accounts, lenders could lose a key source of funding used to support lending activities.

Greene also raised concerns about stablecoins themselves, questioning both their reliability and broader economic impact.

She argued that stablecoins are “not so stable,” citing ongoing questions surrounding reserve backing, regulation, and their use in illicit financial activities. She further warned that a migration of deposits from banks into stablecoins could weaken the effectiveness of monetary policy by reducing the influence central banks exert through the banking system.

Yet not everyone shares that view.

Joining Greene on the same panel, Christopher Waller offered a strong defense of stablecoins, describing them as a legitimate financial innovation that could increase competition and lower costs in the payments industry.

“I’ve always just looked at stablecoins as a payment instrument; there’s nothing evil about it, nothing dangerous about it,” Waller said. “They are just bringing competition into the payments world.”

Waller argued that the market’s enthusiasm for stablecoins reflects genuine demand for faster and more efficient payment systems, particularly for international transactions.

“These things are used for cross-border payments, and they are scaring the banks,” he said. “If you think banks don’t think this is a threat, then why are they lobbying so hard to stop it?”

In the United States, lawmakers have increasingly sought to establish frameworks that would allow stablecoins to operate within a regulated environment. Supporters contend that properly supervised stablecoins could improve payment efficiency, reduce transaction costs, and challenge entrenched financial intermediaries.

Global stablecoin circulation has grown into the hundreds of billions of dollars, and many analysts expect further expansion as tokenized finance becomes more mainstream.

At the same time, central banks continue exploring their own digital alternatives. The Bank of England, the European Central Bank, the People’s Bank of China, and numerous other monetary authorities have studied or tested central bank digital currencies, though most projects remain in pilot stages.

Greene used an analogy to describe the competition among these different forms of digital money.

“I like to think of it as a massive race between the tortoise, the hare and the rhino,” she said.

“The tortoise is the central bank digital currency. The hare is stablecoins and the rhino is tokenized deposits. We’ll probably end up with all three, but if I had to put money in one, it would be the rhino, tokenized deposits, which I think will probably take off.”

The outcome of that race remains uncertain. Stablecoins currently enjoy a significant first-mover advantage and growing adoption in payments and digital asset markets. CBDCs carry the backing of sovereign governments. Tokenized deposits offer the trust and regulatory framework of traditional banking.