From T+2 to New Money Rails: How Stablecoins, CBDCs and Tokenised Deposits Are Reshaping Settlement

The panelists are already making remarks to me. It shouldn't be the other way around. Patrick, I lost the question. It seems like this was already a transition from off-chain to on- chain. OK.

Well, thank you to everyone who joined. I appreciate it. I know, I know, it's late, but I guarantee this is the best panel discussion of the entire conference. Let me point this out right away . So, my name is Lori Keough.

I am the director of Aave Labs in the EU. It is an honor and a pleasure for me to be here. And most importantly, moving forward, I have much better and smarter people here than I do. So I'll ask everyone to briefly introduce themselves, and we'll get right to the point. Paul.

Thank you. So, I am Pavlo Chichkanov. I work at the Bank of England, and my job is to write the rules for the UK’s systemic stablecoin regime , working with the FCA. And for me it will be a very long story. I told you that sometimes you'd have to turn off my microphone.

I represent the Luxembourg House of Web3. My name is Patrick Hennessy, I have been working in the securities industry in Luxembourg for 27 years, and I have been involved in blockchain since 2015, with many pilot projects on tokenization of investment funds investment funds , stablecoins, gold tokens, etc. Thank you very much. And Monica. Monica Turney, I work at ING Bank.

I focus on corporate treasuries. I work within payment and cash management services, and I'm really looking at the use cases for stablecoins, tokenization, settlements, and similar initiatives. Thank you very much. Great experience on the panel. So, Paul, explain this to me, as they say, for the ignorant, okay?

I sincerely believe that it is worth clarifying for everyone present : what is a stablecoin? What is a tokenized deposit? And so, what is a CBDC? What is their difference? Thank you, Lori.

I think this is a dangerous question for a central banker. I could go on for a long time, but I'll try to be brief. So, we have three different types of digital money, and in my opinion, the main difference between them is who issues this money, whose balance sheet is behind it, and what mechanisms are in place to ensure trust in this money. So, a central bank digital currency is obviously issued by a central bank, and it is a direct claim on the central bank's balance sheet . And so when it becomes a distributed ledger technology (DLT) version, the same principles apply.

The exact same thing applies to tokenized deposits. This is ultimately a depository institution's balance sheet requirement, and the fact that it is moving to DLT doesn't really change anything about the nature of that requirement. So tokenized deposit holders benefit from all the protective mechanisms, rules, and regulations that accompany traditional bank deposits today. So, let's move on to stablecoins. This is obviously a token that attempts to hold a nominal value pegged to fiat currency, and it is issued by either a bank or a non-bank institution, and there are rules and regulations in place to support trust in that.

An interesting point from the UK perspective is UK perspective is that we have a regulatory division into so-called systemic stablecoins and non-systemic stablecoins. So when stablecoins get big enough and become systemic, that's when the Bank of England steps in. We tried to design the rules for systemic stablecoins so that they meet the same standards as commercial bank money today. Of course, this is not exactly the same way, but we tried to implement elements that, in our opinion, bring systemic stablecoins as close as possible to commercial bank money. So the idea is that you have a certain hierarchy of money.

You have central bank money, then commercial bank money and systemic stablecoins systemic stablecoins , and then essentially everything else. Wow, I see. It was wonderful. Thank you very much. I feel much more informed.

Monika, when it comes to calculations, some say that this system is broken and it doesn't work today. Do you think this is the case you think this is the case , and is it related to speed, cost, liquidity or operational aspects? What do you think? Speaking of calculations, I think it's not actually broken. To simply use your explanation: when I think of tokenized deposits, it's just a deposit.

So, as banks, we create money by issuing loans. So if I give a loan to Lori and he buys a car from Pavel and you are both ING customers, it happens on ING's balance sheet. So, it's just a movement for balance. Once you buy something from him and he is serviced at Lloyds, we have to put money on the table. So, there is a difference between the payment itself, which can happen very quickly, and in Europe today it is already instantaneous.

And then there is the calculation, which actually happens later through the central bank. So, looking at Europe, there's not a big problem here, but I understand where this question comes from. If we talk about cross-border payments, then there is a division here. We have G20 targets, which are actually targets for the industry: to ensure that by 2027, any cross-border payment reaches the recipient within an hour—at least 75% of them. If you look at what we've achieved today, and these are just averages, right?

So, in 2025, about 55% of payments reached the recipient within an hour, but if we take those that were in the processing process, it was over 90%. But these are, of course, just average figures. The problem arises when the payment has to reach the recipient. And then we talk about friction in the context of transaction monitoring, internal reconciliation processes, and payment lead times. At the same time, the G20 goals, of course, relate to large currency flows.

I mean several major currencies: the dollar major currencies: the dollar , the pound sterling, the Swiss franc, the euro, which largely dominate these averages. So if you go into less liquid and more regulated markets, you regulated markets, you obviously face a bigger problem. When I quoted this on LinkedIn quoted this on LinkedIn , because you always feel obligated to talk about your work, someone asked work, someone asked : “Monica, is it really T + 2? What are you even talking about? But this, of course talking about?

But this, of course , depends on where you are. If you look at these less liquid and limited currencies, this is not an easy problem to solve. Is it even worth trying to solve it? Yes, of course, but it is a very difficult task. If you look at the challenges we're facing right now with time constraints and things like that, yes, another form of money can help transfer funds more easily.

If we look at the cost aspect, then on average the situation is similar. The G20 target is 1% on average for retail payments, last year it was 1.6% last year it was 1.6% , but these are, of course, only averages. So it really depends on where you are, what your use case is, and where you want to go.

Thanks for the context, that was very, very helpful. The first question that comes to mind as a follow-up: if the benefits are there, and you've outlined them—albeit with nuances in certain scenarios and circumstances—why aren't more people using this technology, these assets, now? If you look at the fact that we all use the services of banks. Our business is too, and it is they we trust. As consumers, at least in Europe, we have deposit insurance up to 100 thousand.

And if you work with someone else, the question becomes: can I trust them? Can't I trust them? There is also some complexity in the process. I work a lot with corporate treasurers, and of course they are the cost center in the company. Their task is to manage money, inflows and outflows to ensure proper management of currency risks.

They don't have the resources to deal with any additional channel. They say, "Okay, guys, you can offer this to me if it's going to be beneficial and integrate into my systems, because I don't have time to do it separately." So, I think if you look at it, it's an obvious thing, and the other point is, of course, the risk of the issuer of stablecoins. After all, in the banking system, we have a central bank that stands behind and takes care of the calculations. The stablecoin is backed one-to- one by high-quality liquid assets and commercial bank funds.

But if you look at an individual company like individual company like USDC, you have to trust that everything is happening properly. And of course, in Europe we have regulation and we are in a good position. But from a Treasury perspective, you make a different assessment. In addition, treasurers work with many banks to actually manage risks. So if you add another tool, it's a completely different risk assessment.

OK. Thank you very much. Patrick, I'll give you the floor. Are tokenized deposits a true reimagining of money, or are they just banks playing with blockchain on the periphery? That's a great question, Laurie, and I don't say it for fun.

I could answer as a politician and say it's both . But this is not true. We have already heard here an excellent explanation from the regulator about what CBDCs, depository tokens, etc. are. We just completed a great crash course in liquidity, treasury management, and payments and settlements.

It was wonderful. I need some time to answer your question. I need to talk a little bit about the history of money, actually. And my answer will not only be an answer to your question about the deposit token as a new form of money. This could also be the answer to questions about stablecoins, a digital euro, or wholesale CBDCs.

In fact, we should look at the history of money. And when we look at the whole history of money from clay tablets, and yes, you laugh, but that's exactly what we have to bring to the table when we talk about stablecoins. That we are not actually changing the nature of money. Good? And throughout the history of money, from clay tablets to the Fuggers with their large ledgers, it has never been about the money itself.

There were also the Paradise Stones on the island of Yap , which were effectively the first depository or custodial bank in the world. And the only thing that always changed always changed was the registry. And this is the same thing we do with deposit tokens or stablecoins. We are changing the registry. We are applying a new technological level to our existing money .

OK. And what we're doing—we're creating a system where we can move money differently. We are not reinventing money , but combining it with new products in the financial world, such as tokenized investment funds, tokenized money market funds, and real assets. Because this was, in fact, the missing link for stablecoins or CBDCs. This was truly the missing piece for a full implementation, as it lacked a cash register or a new cash register.

Because when you have a tokenized investment fund, there is a smart contract behind it smart contract behind it , but when you need to make a SEPA payment, tokenization makes no sense. Good? So now, with these digital money or deposit tokens, we're creating a way to connect our, let's say, regular money with new products in our on-chain world. So, for me, the answer to your question is: no, we're not reinventing money , we're reinventing a way to move it. OK.

Thank you very much . Monica, you just touched on this issue: isn't instant payments something like a game of whack-a-mole? You solve one problem here, but it leads to risks elsewhere. Yes, when it comes to payments, I think there are some nuances here, and it's important to understand this, because in the modern world, payment and settlement are different things. Like in the example I just gave, it's an accounting transfer.

Even here, the calculation is done separately. To translate this into real money: if I give you 100, and you give me 95, today we are paying by five. If you look at the volume of market infrastructure, such as the Continuous Linked Settlement system, which is actively used for currency transactions, it is 8 trillion every day. They only calculate a tiny fraction of that. And if you look at blockchain, it has a wonderful concept of atomicity.

That is, we have a set of transactions in the database that are either executed completely or not at all. You contribute your 95 to this contract, and as soon as I contribute my 100—we exchange. But if you think about liquidity, it becomes very expensive. There should be 195 on the table. In my previous example, it was five.

So, when thinking about calculations, the concept of liquidity is important. This is something to consider when you are looking at atomic contracts to make sense. If you are exchanging real economic value, you don't have liquidity saving mechanisms like netting, which I just talked about. This makes sense, but not always. Actually, that's all always.

Actually, that's all . If you look at the second component you asked about— you asked about— risks—they are obviously shifting. Because today the risk lies in the fact that the regulator is making sure that money is actually worth what it should be worth. With atomic settlement, you exchange real value and get exactly what you have, but there are more technical issues, as well as issues at the issuer level. So you need to be very careful about what you put into this contract and what exactly you are exchanging.

OK. Thank you very much. Pavel, something simple and easy. Something juicy, meaningful, savory, and light. Um, should regulators slow down the adoption of stablecoins if it leads to a decrease in bank deposits?

Thank you, Laura. That, that's a good question. Let me start on the positive side: I think the Bank of England is actually very supportive of innovation in payments, and our long-term vision is to create a multi- currency ecosystem where different forms of money can move freely and be interchangeable be interchangeable . And you know, in terms of the stablecoin regime, we are willing to go further than other regulators in supporting innovation by providing a fairly high level of access to our balance sheet. Stablecoin issuers can place their collateral assets directly on our balance sheet.

We are also creating a central bank liquidity mechanism, as other central banks do. So central banks do. So , I think, yes, fundamentally we support innovation. We are really taking steps to support them. But, uh, there 's a big "but" here too.

When national regulators create rules for their economy, they must take into account its structure. A huge feature of the UK is that the banking sector provides most of the credit to the real economy. And we must take this into account. For example, 85% of For example, 85% of credit to the real economy comes from British banks. It's not about protecting the banking sector the banking sector , but we need to potentially manage the risks during the transition.

We looked at different tools for this. The first such tool we proposed was holding limits, that is, a proposal to limit the amount an individual or business can hold. It's safe to say that it was very, very poorly received by the industry received by the industry . So bad that people were even renting vans and parking them outside the Bank of England. They placed advertisements on the London Underground to get their point across.

But there was an important message behind this performance: ownership limits were too costly and difficult to implement. However, we still believe that safeguards are needed against the possibility of stable deposits leaving the banking system and moving into stablecoins, and while they can be reinvested, I believe there are still potential risks to lending. So, we are implementing what are called temporary buffers, whereby each systemic stablecoin can grow to a limit of 40 billion, and I believe that this is sufficient room for innovation that provides a good balance between supporting development and protecting against risks to financial stability. Good. Thank you very much.

Very interesting. Last series of questions. So, the main question of our panel discussion: if you were to look into a crystal ball, what do you think will become the dominant institutional currency or token for payments in 10 years? Will these be wholesale CBDCs? Will it be stablecoins?

Or something else? Monica, what do you think? I believe they will all coexist. Because they serve different purposes. If we talk about wholesale CBDCs or wholesale settlements, then due to the huge volumes moving there, there is a certain use case.

The same applies to tokenized deposits, this is also a specific case. There is always a credit risk factor with deposits. If you look at corporate treasurers, they work with working capital financing and other things where there is a need to support this form of money, and that's where tokenization can help. Of course, tokenized deposits without a central bank central bank are just another type, we are also members of Finality, which could be an option, but as a settlement tool, they are just accounting transfers. It's all so simple.

So, a combination of both is needed, which could be a wholesale CBDC, Finality or something similar Finality or something similar . And the third is, of course, stablecoins, which already have use cases because they are being used, and we are now figuring out where they fit best and seeing a lot of big players coming on board and trying to use them in a variety of settings variety of settings . Fantastically. Thank you. Patrick, what are your thoughts?

Well, 10 years is a very, very long time, colleagues, isn't it? I think I'll be retired by now. And if you think back 10 years ago, when I did my first pilot project with a smart project with a smart contract to tokenize an investment fund investment fund , those were truly pioneering times, and what has happened in 10 years is simply happened in 10 years is simply amazing. So, I think in 10 years we will see a completely different world of finance, but I don't believe there will be one winner here, because it will all essentially depend on the use cases. And since I don't have a crystal ball, I'll use it a second time— use it a second time— because last year here in Barcelona, ​​I already used or borrowed a Socrates parable to answer I like this question, and I can use it again because I can always adapt it to the title of the panel.

And this is, in fact, the parable of the three sieves or three filters. And in fact, every institution, every corporation, every investor should use these three filters to understand which digital money is best suited for their purposes. And these three filters for stablecoins— stablecoins— last year I used the other three, but this year I'm going to use trust, utility, and integration as filters. So whatever use case you have, you have to pass it through these three filters. So, trust: can we trust the issuer?

Can we trust the smart we trust the smart contract behind this? Can we trust the infrastructure I'm using? And if you find it, if you can answer all of these in the affirmative, then good, you will find your digital money. Then you move on to the second filter, which is usefulness. So, is the digital money I will be using will be using the right means to transfer my funds to where I want?

Or you need to apply a second and then a third filter after the second. Can I integrate this into my current architecture? Because we will not completely remake the banking system. Today, the banking system is almost 100% system is almost 100% monolithic, based on outdated and core systems. We will not remove them completely.

We will replace their parts, so the solution you choose—whether it's a stablecoin, a CBDC, or a deposit token— deposit token— it should integrate with your current system. Because we will have gateways between the off-chain and on-chain networks that will be operational in the next three to five years, and maybe in 10 years, when I retire. Okay, perfect. Thank you very much, Pavel. The last word is yours.

Yes, very briefly. I think, I think, when it comes to settlements in central bank money, that's a very strong anchor that I think will be very difficult to shake. There are international standards international standards that require settlements in central bank money, and central bank money, and , you know, obviously, the level of trust that exists there. And central banks are making great efforts to preserve the role of central bank money; you know, the Bank of England is updating its systems, the ECB is doing the same on its side, so I think this anchor will remain. The main question, obviously, is: can stablecoins play a role in settlements?

And I believe that it is stablecoins that must prove their ability to provide the same results as, say, commercial bank money today. And we're allowing this to be experimented with in the digital securities sandbox in the UK, and I think that using everything we learn there, we'll decide what role stablecoins will play in the calculations. Fantastically. Thank you very much to Pavel, Patrick and Monica, please give everyone a big round of applause, thank you very much.