Tokenization is one of the concepts most linked to the adoption of cryptos. In the financial sector, for example, this notion manifests itself in particular through decentralized finance (DeFi). As the latter’s potential is increasingly recognised, the Bank of England intends to integrate it into its monetary policy.
Bank of England Pragmatic on Tokenization?
The tokenization of financial assets is gaining momentum in England. A dynamic that confirms the growing enthusiasm of investors for cryptocurrencies. For the Bank of England (BoE), it is not about denying this fact, but about accepting it by preparing for it.
is in essence, the message which Sir Jon Cunliffe, deputy governor of the BoE, insisted on passing. It was during the Innovative Finance Global Summit held in London on Monday, April 17.
The banker explained how the UK central bank is preparing for this development. Specifically, the financial institution is exploring the possibilities of tokenizing bank money. An analysis that takes into account non-bank currencies, such as stocks and mutual funds, and CBDCs.
BoE is mainly studying how tokenized financial assets interact with each other. For her, the objective is to determine the most relevant option for her integration into the financial system. This, without running the risk of destabilizing the economy.
With this in mind, a few tokenization options seem to stand out. This is particularly the case for stablecoins which, according to Cunliffe, “offer the possibility of greater efficiency and better functionality in payments”.
This is also the case for central bank digital currencies (CBDCs) and tokenized bank deposits. The latter would be “a much simpler proposition than non-bank stablecoins”. A benefit that would allow bank deposits “to better compete with non-bank payment currencies.”
For the deputy director, the main problem with tokenization continues to be regulation. He believes that, without the latter, a relevant integration of financial assets would be necessary. “extremely unlikely”.
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