TechFlow news, November 2 — According to Cointelegraph, Omid Malekan, an adjunct professor at Columbia Business School, said that while banks and financial institutions are experimenting with "tokenized bank deposits," this technology may struggle to compete with over-collateralized stablecoins in terms of functionality, security, and ecosystem compatibility.
Malekan pointed out that stablecoin issuers must maintain 1:1 reserves in cash or cash equivalents, giving them an advantage over fractionally reserved banks issuing tokenized deposits when viewed from a liability perspective. In contrast, tokenized deposits, although recording bank balances on blockchains, face functional limitations, strict permission controls, lack cross-border payment capabilities, cannot serve the unbanked population, and fail to enable atomic asset swaps within DeFi.
He further commented: "A tokenized bank deposit is like a checking account that can only write checks to other customers of the same bank—what's the point of that?"
