How stablecoins, tokenised deposits and AI are rewiring money
TradFi is not being replaced by blockchain technology so much as being overtaken by regulated bank money, central bank money and tokenised assets becoming interoperable globally. Citi itself now describes the future as one in which deposits, payments, investments and collateral exist simultaneously in conventional and tokenised forms. Meanwhile, Jane Fraser, the Scottish-born CEO of Citigroup, has recently praised London as an important centre for regulation and talent. The arrival of tokens and the use of tokenised bank deposits alongside stablecoins presents an opportunity to be actively pursued so as to lead the financial world from the traditional to the inevitable token future. One early example:
Stablecoins
Similar to cash, tokenised money will be present everywhere enabling payments to happen in near real time, with privacy and 24x7 access via digital wallets. From my own business travels, a drawer at home still holds coinage and small notes from Cyprus, Hong Kong, Switzerland, Spain, Finland, Malta and the US (the latter often earning a 50% discount on merchandise abroad.) In Zimbabwe, at the height of its inflation crisis, taxis added two extra zeros (x100) to the fare just to keep pace. A sound-jurisdiction stablecoin, held at 1:1 par value, is likely to see accelerating use worldwide since these digital tokens are easy and convenient to use and all generations now routinely rely on mobile phones and the internet. Moreover, privately issued sterling money backed within a central-bank-supervised framework is not conceptually new. The six authorised Scottish and Northern Irish note-issuing banks are required to hold backing assets, at least equal to their outstanding notes. Those assets can include Bank of England notes, UK coins and funds held at the Bank of England. Britain has, therefore, already operated a system in which private banks issue sterling-denominated instruments whilst regulatory rules preserve confidence in their redemption. Tokenisation potentially recreates that concept digitally, albeit through a very different legal and technological architecture.
Singleness of money
This is the principle that all forms of money within an economy, e.g. physical cash, commercial bank deposits and other money-like instruments are fungible and exchangeable at a fixed 1:1 par value, regardless of which institution issued them (e.g., Hong Kong banknotes issued by HSBC). A dollar held as a bank deposit should always be worth the same as a dollar in cash or a dollar held at another bank, with no discount or premium based on the issuer’s perceived creditworthiness. This is typically maintained through mechanisms such as central bank backing, deposit insurance and interbank settlement systems which allow bank liabilities to circulate interchangeably with public money (central bank liabilities). These mechanisms address regulators’ concerns about anything that might undermine the foundation of a well-functioning monetary system: regulation of custodians and investment managers provides the infrastructure that brings tokens and stablecoins into the realm of singleness of money, allowing token-related risk to be managed alongside existing fiat currency. Furthermore, the Bank for International Settlements (BIS) takes a cautious position here: stablecoins could trade away from par and therefore potentially undermine singleness, whereas tokenised commercial-bank deposits settled in central-bank money are more naturally compatible. Regulation, high-quality reserves, redemption at par and central-bank liquidity arrangements make stablecoins more “money-like”, whereby allowing them to co-exist with tokenised deposits and approach a similar level of trust.
Stablecoins and private issuers
Many countries enjoy strong credit ratings. Ratings affect the cost of borrowing: the higher the rating, the lower the cost, with a low rating (C to D) plausibly adding several percentage points to the cost of a large loan and so illustrating just how material the rating gap can be. By issuing stablecoins backed by high-quality government debt, a private issuer can narrow the credit-rating gap between a stand-alone issuing company and the credit rating of the underlying fiat currency itself. In practice: the issuer buys short-term UK government debt (“Token Gilts”) as backing assets and earns the interest on those gilts. The Bank of England’s June 2026 framework for systemic sterling stablecoins now proposes a steady-state backing mix of 70% short-term UK government debt (gilts with a residual maturity of up to six months) and 30% unremunerated Bank of England deposits, together with contingency planning for liquidity stress. This is an increase from the 60/40 split originally proposed in 2025, and following industry feedback the Bank judged that raising the gilt allocation makes the commercial model more viable without compromising the ability to meet redemptions.
UK stablecoin reserves and the Gilt market
A systemic sterling stablecoin issuer could earn income from the portion of reserves invested in short-term government securities, whilst the remaining 30% sits unremunerated at the Bank of England - a structure the Bank says is intended to balance resilience with commercial viability. If sterling stablecoins reach real scale, they could become a new structural buyer of short-term UK government debt; HM Treasury and the Debt Management Office are reportedly examining how stablecoin demand could influence T-bill issuance and secondary-market liquidity.
Leaders in the approach to tokens
The shift from crypto-market speculation toward tokens with 1:1 par-backing assets, held and managed by independent custodians and investment managers, is a significant one. Among the world’s major currencies (USD, EUR, JPY, GBP and HKD/RMB) the UK is the notable latecomer, with its regime not expected to be fully in force until 2027. The EU’s MiCA regime remains the most advanced framework in place today.
Under MiCA (Markets in Crypto-Assets Regulation)
· a token that maintains its value by reference to one official currency is an E-Money Token (EMT).
· an asset-referenced token (ART) is broader: it references another value, right or combination of assets/currencies.
· utility tokens are not classified as traditional financial instruments.
MiCA entered into force in 2023, with its crypto-asset provisions becoming applicable through 2024; uniform token authorisation is now underway across all 27 EU member states under this single legislative framework.
UK vs EU: a comparison
The UK model is becoming clearer. The Bank of England published near final stablecoin rules on 22 June 2026, and the joint HMT/Bank of England/FCA tokenisation consultation closed on 3 July 2026. A token gilt is currently being tested in the FCA’s digital sandbox, with a pilot expected in early 2027. The broader UK stablecoin regime is scheduled to take effect on 25 October 2027, with systemic sterling stablecoins falling under the Bank of England’s framework:
· EU - harmonisation first, via a single MiCA framework.
· UK - differentiated regulation according to systemic importance, split across HMT, the Bank of England and the FCA.
· US - a potentially distinct model centred on privately issued payment stablecoins and banking-sector integration.
Cross-border token activity
The most successful stablecoins and digital-asset tokens will be those that are easy to use, trusted and remarkably cash-like, making international use all but inevitable. Compliance with local regulation needs to be continuous with deviations addressed immediately, given how near instantaneous this infrastructure is. Here, agentic AI has a role to play it needs to verify that any token it is offered is fully compliant. Enforcement against a failing issuer sits within the underlying regulatory regime much as Scottish-issued banknotes ultimately fall back on the Bank of England.
Delivery versus payment (DvP)
In securities transactions, delivery versus payment ensures the transfer of assets and payment for them to happen simultaneously - the old expression “cash on the barrelhead” captures the idea: no one is left out of pocket if something goes wrong. For cash, this means finality of payment which can take two forms: probabilistic (often used for small amounts) or deterministic (payment is fully settled). Going forward, “atomic settlement” (the instant, simultaneous exchange and finality of a transaction) is likely to become more relevant as jurisdictions agree bilateral arrangements. For securities, the settlement window keeps shrinking. Before London’s 1986 “Big Bang”, UK settlement took roughly a fortnight (about 10 days). From 11 October 2027, it will shorten to T+1, aligning with the US and the EU, which is moving to T+1 on the same date.
Economic implications
Because cash serves both as a payment method and a store of value, non-transferable tokenised deposits can represent customers’ existing deposits at their own bank - behaving much like today’s deposits and continuing to redeem at par. If bearer or transferable tokenised deposits begin circulating between institutions or investors (much like today’s Scottish pound notes), the issuing bank’s central bank will stand behind the money. With a sterling stablecoin, the backing assets are gilts. In Europe, this sits within MiCA’s Asset-Referenced Token category under a single regulatory framework. In the UK, by contrast, oversight is split three ways across HMT, the Bank of England and the FCA. This is arguably, a more complex regime than the EU’s single MiCA framework, although one that reflects how much economic weight rests on getting the UK’s wholesale and City infrastructure right. HM Treasury is championing the tokenisation of this well-established, trillion-dollar traditional wholesale market infrastructure.
As former Citigroup, CEO, Walter Wriston once put it: “All of life is the management of risk, not its elimination.”
I think collision is the wrong metaphor — what's happening looks more like one system quietly hiring the other's plumbing while keeping its own compliance department. That's less dramatic and much harder to unwind later.