Stablecoins Surge, But Tokenized Deposits May Still Have a Role
From programmable payments to collateral in capital markets, blockchain-based currencies are moving past theory and into financial infrastructure
Stablecoins are on a tear. Global capitalization soared past $200 billion last year, and institutional players embrace it for everything from cross-border payments to collateral in trading. But as new stablecoins flood the market, questions emerge: Do tokenized bank deposits stand a chance? And will traditional finance adapt—or get steamrolled?
Stani Kulechov, CEO of Aave Labs, said stablecoins emerged about a decade ago to provide stable value on-chain—something early cryptocurrencies couldn’t deliver due to extreme volatility.
“Over time, stablecoins became a big function of many of these decentralized—well, centralized—marketplaces,” he said. “They became a way to create different types of functionality in decentralized finance, for example, lending and yield.”
Unlike native crypto assets such as Bitcoin or Ethereum, which fluctuate wildly, stablecoins are pegged to fiat currencies like the U.S. dollar or euro. This makes them uniquely suited for use cases where predictability matters, particularly in trading, lending, and collateralization.
Jean-Marc Stenger, CEO of Societe Generale-FORGE, said, “With tokenized deposits, you're largely enhancing an existing payment system, but you still need to have a cash account with a bank.” In contrast, he added, “stablecoins bring on-chain an asset which exists in itself. The transaction is the payment.”
Luke Dorney, head of custody at LMAX Group, said the appeal of stablecoins is rooted in speed and efficiency.
“One of the things around the digital asset ecosystem, especially the post-trade infrastructure, is that, albeit all on-chain, it operates relatively old-fashioned. A lot of the transactions are pre-funded on the exchange,” he said.
Because fiat and digital assets move at different speeds, stablecoins help unify settlement timing.
Nathalie Oestmann, partner at Mangosteen Advisory, said the legacy payments infrastructure remains surprisingly inefficient.
“There’s a whole chain behind that that happens,” she said. “It’s a multi-step, very costly process. So, how can you remove that cost?”
Building use cases
At the Digital Assets Summit, organized by FT Live and held in London on May 6, 2025, panelists acknowledged that while stablecoins have momentum, tokenized deposits aren’t dead yet. They offer a compliant, bank-controlled pathway into digital finance, particularly appealing for risk-averse institutions.
Oestmann said stablecoins offer both technical and financial advantages.
“Stablecoins suddenly become really important also because they're stable and not fluctuating,” she said.
She added that they’ve opened the door to bypassing entrenched financial infrastructure: “There was this option to disintermediate these global players that have been there that are basically just sending messages across the system.”
She also pointed out that new networks are already forming around stablecoins.
“Circle (the issuer of the USDC stablecoin) has just announced that they have a payment network. Mastercard has come out with its payment network,” she said. “Everybody’s getting involved in being the next new payment rails.”
Stenger said Societe Generale’s EUR CoinVertible stablecoin was developed to serve digital-native securities issued directly on public blockchains like Ethereum.
“We needed to add cash on-chain and not bridge our traditional payment rails with those digital securities.”
For SocGen, the motivation wasn’t hype—it was the need to support actual client activity.
He also highlighted the advantage stablecoins bring over traditional messaging systems like SWIFT.
“Tokenized deposits are closer to what I would call a messaging system, which allows you to transfer the information that a payment has occurred,” he said. “But at the end of the day, you still need the cash account and settlement.”
Kulechov said, “Our main use case is collateralization of assets, being able to borrow against them and earn interest rates, creating a global permissionless interest rate market.”
He explained that the design behind GHO, Aave’s new stablecoin, was focused on predictable borrowing costs. “Down the line, the idea with the infrastructure is to have something very resilient, which tries to mitigate central points of failure.”
He added that Aave’s system had processed over $200 million in automated liquidations without incurring bad debt, something he said was only possible with smart contract–based systems that remove human error.
Regulatory squeeze and market saturation
Despite this momentum, the market still faces growing pains, especially in Europe.
Dorney said, “There are around 10 or 11 MiCA-compliant stablecoin issuers already in play, and you can probably multiply that by three or four of the others in the queue.”
Referring to the EU’s Markets in Crypto-Assets Regulation (MiCA), he explained that while regulation brings clarity, it also leads to fragmentation.
“As an exchange, we need stablecoins,” he said. “But we don’t need 10 to 30 European stablecoins.” The result is a crowded field where most new entrants will fail to gain traction.
“Liquidity is chasing liquidity,” Stenger said. “Stablecoin is a critical asset in many respects, and it needs to be perfectly liquid, widely accepted, and interoperable.”
He predicted that no more than four or five major stablecoins would ultimately dominate the global landscape.
However, he noted that creating the coin is the easy part.
“The value and the difficulty of a stablecoin is actually the network effect,” he said. “How many crypto exchanges are you referenced with? How many corporates are using your asset for cross-border payments?”
“The competitive edge is in the boring stuff,” Dorney said. “Can you burn that stablecoin on a 24/7 basis? Who are your banking partners? Can you move cash quickly?”
Kulechov said current dominant players like USDC and USDT don’t have direct distribution channels. “They don’t really have massive audience-facing applications,” he said. “Once there are issuers with distribution, the balance will shift.” He predicted mergers among smaller players and a shakeout of the overly saturated market.
Beyond payments
While stablecoins have been mainly discussed regarding trading and payments, panelists emphasized their deeper potential. Stenger said his firm sees a future in automating complex financial processes.
“We see a lot of use cases where the programmability of stablecoin will be used,” he said. “For example, linking corporate actions—like paying a coupon or redeeming a structured product—and automating the settlement.”
He added that banks should lean into this shift rather than resist it. “Everything is going digital, and cash will be digital tomorrow.”
Kulechov said, “We’re talking about moving value that is sitting somewhere on a MySQL or Oracle database into a new type of database with new properties that can be programmed.”
He forecasted that stablecoins would soon eclipse crypto-native tokens in market capitalization and that tokenized real-world assets could ultimately become the dominant asset class on-chain.
“Five years from now, token-form securities might outgrow stablecoins and crypto-native assets,” he said.
Dorney said stablecoins and tokenized deposits have their place.
“They need to coexist,” he said. “They’re two different market segments with different use cases.”
He described tokenized deposits as a useful entry point for institutions still wary of public blockchains.
Oestmann said the road to widespread adoption still involves significant technical and compliance hurdles.
“There’s a lot of UX improvements needed—not just from a consumer perspective, but even for institutions,” she said. “We need to rethink how compliance and risk controls operate in this new environment if we want to scale.”
Even as stablecoins dominate headlines, tokenized deposits could quietly serve as the foundation for integrating traditional banking with the programmable financial systems of tomorrow.