Tokenised Private Money

Ten years on since the launch of the first stablecoin—conceived as a stable alternative to volatile cryptoassets—tokenised money is moving through a phase of innovation into a phase of diffusion. 

Our research, conducted by the University of Cambridge’s Centre for Alternative Finance, analyses the evolving landscape of privately issued tokenised money, the underlying infrastructures and the regulatory trends shaping its development. The report documents emerging use cases, examines the challenges of interoperability and programmability, and assesses the enabling and constraining influence of regulation across jurisdictions.

To compare tokenised money instruments, a classification framework is essential. Without such a framework, conceptual ambiguity hinders meaningful analysis, risk assessment, and policy development. Despite that, no widely accepted taxonomy has emerged, and the terminology used by market participants and regulators remains inconsistent. This study introduces an exploratory two-layered approach to classify tokenised money. The proposed framework maps instruments across the core dimensions: nature of the claim, its backing, form, and access; alongside additional features relating to business models, technical architecture, and legal and governance properties. Four broad instrument categories are identified: central bank digital money, commercial bank claims or deposits, pre-paid fiat representations (commonly referred to as fiat-backed stablecoins), and fiat-anchored asset positions.

The research reveals a diverse ecosystem where tokenised money instruments play competing and/or complementary roles. Four main use cases have emerged in recent years, supporting the adoption of tokenised money beyond crypto-trading: (i) cross-border payments and settlement; (ii) treasury and liquidity management; (iii) trade finance digitisation; and (iv) capital markets infrastructure. Supported by their 24/7 availability, lower transaction costs and bearer-instrument characteristics, stablecoins are used in settling trades in decentralised finance, crypto exchanges and for crossborder payments. Tokenised deposits are emerging as a viable tool for institutional treasury management, offering familiar banking relationships and regulatory frameworks combined with digital efficiency. Meanwhile, tokenised money market funds are beginning to compete for some use cases, particularly where yield-bearing features are attractive.

Adoption tends to follow a gradual path: basic use cases, especially cross-border payments, are followed by treasury management and more complex applications. Regulatory and non-regulatory barriers remain—including privacy concerns and infrastructure limitations—but the pace of adoption is accelerating. 

Interoperability is a critical barrier to scaling. While the basic functionality of tokenised money is well understood, seamless integration across networks is less so. Achieving interoperability requires addressing numerous systemic challenges: cross-border efficiency, cross-platform connectivity, cross-asset integration, regulatory harmonisation and governance coordination. The initiatives examined in this report—Partior, Project Guardian, RSN, and Project Agorá—provide evidence on different approaches to these challenges (eg, from consortium-based private networks to public blockchain solutions with added privacy layers), with varying levels of maturity and success. 

Programmability is best understood as an accelerator of adoption. Programmability is already enabling innovative pilot applications, including trade-finance automation, parametric insurance and AI-driven commerce and treasury optimisation, and its importance is expected to increase over time. Considerations around technical architecture decisions, implementation approaches and emerging standards will determine to a large extent whether tokenised money can achieve the scale and functionality necessary to transform global financial infrastructure.

Policy and regulatory choices both constrain and enable the development of tokenised money. The analysis highlights some of the most salient features, challenges and potential gaps that stem from the development and implementation of tokenised money regulation. AML/CFT and illicit finance risks, cybersecurity and operational resilience, and financial stability are identified as the top priorities by regulatory authorities. Risks to monetary sovereignty—particularly linked to the predominance of US$-denominated stablecoins—are gaining prominence in regulatory discussions, too, especially in Emerging Markets and Developing Economies (EMDEs).

The pace of regulatory action is accelerating, particularly following the policy shift in the United States toward a more industry-supportive approach, but fragmentation remains. Despite the rollout of international standards for stablecoins and efforts to oversee their implementation, views on the effectiveness of jurisdictional frameworks and the prospects for greater alignment and supervisory cooperation diverge. The comparative analysis of stablecoin regulations across five jurisdictions—the European Union, Hong Kong, Japan, Singapore and the United States—also highlights significant areas of divergence, including requirements for reserve assets and subsidiarisation of foreign issuers.

Regulatory attention is gradually shifting from the issuance of stablecoins to their use in payments, implications for monetary policy and the regulatory issues raised by other tokenised money instruments. Important uncertainties remain around the use of public permissionless blockchains as infrastructures for recording and transferring tokenised money. Issues such as interoperability, operational resilience and the role of smart contracts in embedding compliance and risk management are likely to become more relevant in the next phase of regulatory response.

As adoption continues to expand, the challenge for policymakers will be to create frameworks that enable innovation while safeguarding the safety, stability and integrity of the monetary and financial systems. 

The authors’ complete study is available here.

Hugo Coelho is the Director of Policy and Advisory at Financial Innovation for Impact (Fii) and Cambridge Centre for Alternative Finance.

Keith Bear is a Fellow at the University of Cambridge Centre for Alternative Finance.

Hatim Hussain is a Research Affiliate at the University of Cambridge Centre for Alternative Finance.