The Bank of England puts stablecoins in their place: The stablecoin boom is only temporary and will soon be replaced by deposit tokens

Bank of England policymaker Green believes stablecoins could be replaced within five years by tokenized deposits, but Federal Reserve Board member Waller defends stablecoins, seeing them as a key innovation driving payment competition. The divergence reflects differing regulatory philosophies of the UK and US central banks regarding stablecoins.
(Background: The Bank of England officially regards stablecoins as "new forms of currency")
(Additional context: Stablecoins and CBDCs are competing forces—can only one survive?)

This article outline

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• Green’s argument: Tokenized deposits vs stablecoins
• Waller’s opposing view at the Federal Reserve
• The underlying reasons for the divergence between UK and US central bank perspectives

Megan Greene, a member of the UK Monetary Policy Committee (MPC), publicly stated over the weekend that the craze for stablecoins might be a temporary phenomenon, and in the future, they will be replaced by "tokenized deposits"—the digital version of traditional bank deposits. She believes that in five years, the industry might look back and wonder why stablecoins were even a topic of discussion.

Greene pointed out at a conference in Dubrovnik, Croatia, that central bank digital currencies (CBDCs), stablecoins, and digital deposits each have their market niches, but once commercial banks realize that "if they don’t act, they will lose traditional deposits," tokenized deposits will become the ultimate winner.

Green’s argument: Tokenized deposits vs stablecoins

Green’s logic is quite straightforward: stablecoins are essentially private sector-issued debt certificates, usually backed by commercial bank deposits—meaning they are still a "second-layer structure built on the banking system." In contrast, tokenized deposits directly put bank deposits on the blockchain, bypassing intermediaries, which theoretically makes them more efficient.

Her view reflects the traditional skepticism of the European Central Bank system toward stablecoins. The Bank of England has repeatedly regarded stablecoins as "new forms of currency," but in regulatory design, it has always favored solutions involving direct participation by the banking system.

It’s worth noting that Greene does not deny the short-term value of stablecoins—she acknowledges that these assets are driving competition in payments and fostering financial innovation. But her core argument is: once the banking system fully embraces tokenized deposits, the "middleman advantage" of stablecoins will gradually be eroded.

Waller’s opposing view at the Federal Reserve

At the same conference, Christopher Waller, a Federal Reserve Board member, defended stablecoins, arguing that they should not be stifled by excessive regulation.

"I’ve always viewed stablecoins as a payment tool; they are neither malicious nor dangerous," Waller said. "They simply bring competition to the payments space."

Waller’s stance sharply contrasts with Greene’s. He believes the core value of stablecoins lies in introducing "competition" to the banking system—especially for cross-border payments and small transactions, where stablecoins can offer similar liquidity at lower costs. His concern is that overly tight regulation (such as requiring 100% cash backing or limiting issuance size) could stifle the innovation potential of stablecoins.

The underlying reasons for the divergence between UK and US central bank perspectives

The disagreement between Greene and Waller reflects broader differences in the regulatory philosophies of the UK and US regarding stablecoins: Europe tends to "regulate innovation through institutional integration" (bringing tokenized deposits under banking oversight), while the US prefers to "let the market run ahead" (treating stablecoins as payment competitors).

This divergence could profoundly influence the global regulatory trajectory for stablecoins. If the UK adopts Greene’s view, it might push the "British stablecoin bill" toward a bank-led tokenized deposit framework; if the US follows Waller’s approach, stablecoin regulation could be more permissive, encouraging private sector innovation.

Regardless of who wins this debate, stablecoins have already proven they are no longer a "temporary meme"—they have become a financial infrastructure that central banks, legislators, and commercial banks cannot ignore.