Columbia Business professor casts doubt on tokenized bank deposits

Banks are experimenting with tokenized deposits—basically bank balances on blockchain—but Columbia Business School professor Omid Malekan says they're DOA compared to stablecoins. 💀

Malekan drops the truth bomb: Overcollateralized stablecoin issuers (who keep 1:1 cash reserves) are safer liability-wise than fractional reserve banks issuing tokenized deposits. Stablecoins are also composable—they move freely across crypto ecosystems and plug into DeFi apps, while tokenized deposits are permissioned, KYC'd, and functionally limited.

Malekan compares tokenized bank deposits to "a checking account where you could only write checks to other customers of the same bank." He goes on:

Meanwhile, the tokenized RWA sector—which includes fiat, real estate, equities, bonds, commodities, art, and collectibles—is projected to hit $2 trillion by 2028, per Standard Chartered Bank. 📈

Malekan argues tokenized deposits also have to compete with yield-bearing stablecoins or issuers finding loopholes in the GENIUS stablecoin Act to pass on yield via customer rewards.

Banking lobby is pushing back hard against yield-bearing stablecoins, scared that sharing interest with customers will eat their market share. Current average savings account yield in the US/UK? Under 1%—anything above that is instant customer bait. 🎣

NYU professor Austin Campbell called out the banking lobby's resistance, accusing them of using political pressure to protect their own interests at retail customers' expense.