Digital assets are moving closer to institutional use, but adoption is not converging on a single form of digital money. Stablecoins are finding uses in liquidity management and cross-border payments, tokenised deposits can support round-the-clock movement within banking ecosystems, and central bank money can provide the settlement leg between commercial banks.

The harder question is how those forms of money, and the tokenised assets they settle, can operate together at scale. That requires economic use cases, more mobile collateral, workable standards, regulatory guardrails and infrastructure that connects blockchain-based activity with existing banking systems.

Sabih Behzad, Head of Digital Assets and Currencies Transformation at Deutsche Bank, said the market had for too long framed stablecoins, tokenised commercial-bank money and central bank money as competitors with one eventual winner. In practice, he said, they have different characteristics, advantages and challenges, making them suited to different use cases.

Different forms of digital money are finding different roles

Behzad said stablecoins continue to support crypto markets but are increasingly attracting interest for traditional-finance use cases, including liquidity management and cross-border payments. One emerging model is the “stablecoin sandwich”, where a transaction begins in fiat currency, uses a stablecoin for the cross-border leg and converts back into fiat at the destination.

Tokenised commercial bank money serves a different purpose. Behzad said tokenised deposits can work particularly well for movements within an ecosystem because they preserve the liability of the issuing commercial bank while enabling 24/7 transfer and rebalancing across jurisdictions.

Stablecoins can be useful when value has to bridge different banks or ecosystems, while central bank money can provide the settlement leg needed when money moves across commercial banks.

For Behzad, coexistence reflects the different liabilities and economic characteristics of these forms of money, rather than a need for the market to select a single winner.

Tokenised collateral has a liquidity case but still faces operating barriers

Behzad said the potential liquidity benefit from tokenising collateral is large because financial institutions move substantial amounts of collateral between counterparties, central counterparties and securities depositories. Collateral can take two or three days to settle and may not be immediately available, leaving it, in his words, carrying “dead weight”.

Faster mobilisation can free liquidity and enable more economic activity.

Behzad nevertheless identified three barriers. Tokenised collateral is not yet treated consistently across jurisdictions; issuance remains fragmented across technology platforms; and many clients still need to understand the operational and economic benefits before adoption can scale.

The technology barrier is particularly important. Behzad said the market needs banks and financial institutions to congregate around fewer assets and platforms rather than continually adding chains and venues. He said that consolidation is starting, but is not yet complete.

Interoperability is improving without being solved

Behzad said the industry is converging on interoperability, although the work is incomplete. Existing rails will live alongside new ones, making uniform messaging important and encouraging established ISO standards from traditional finance to carry into tokenised environments.

Behzad said token standards still require work, but saw clearer direction and more solutions capable of connecting different token standards and blockchains. He stopped short of saying the problem has been solved, describing the progress as substantial but incomplete.

Regulation provides the guardrails for scale

Behzad rejected the idea that regulation is primarily a barrier to digital asset adoption. He said regulators are “absolutely critical” because clear guardrails help banks understand how they can operate and give traditional financial institutions greater confidence to enter the market.

Behzad said regulators across Asia, Europe and the United States were developing guardrails that allow banks and traditional finance firms to enter the market. He said public- and private-sector collaboration is particularly important as new technology emerges, and described regulators as increasingly pragmatic in their approach.

Behzad said traditional finance and decentralised finance were moving closer together. He argued that traditional finance could learn from the way crypto markets found product market fit for innovations such as stablecoins, while the decentralised-finance industry was recognising that banks, financial market infrastructures, central securities depositories and central counterparties would need to participate for use cases to scale. He added that traditional finance needed “a level of humility” in that convergence.

Custody and controls become foundational

As more money and assets move on-chain, Behzad sees wallet infrastructure as “the cornerstone” for banks. He said Deutsche Bank had developed its digital asset custody offering and had now made it available to clients, describing it as the bank’s first foray into the space and a foundation capability.

Behzad also stressed that standard control tools used in traditional finance do not automatically transfer into blockchain environments. Banks need the ability to analyse blockchain activity, understand movements and assess the risks they are running. The third requirement, he said, is interoperability: banks need to understand how new elements will plug into traditional systems, where the integration points sit in the technology stack and to start that work early.

On-chain cash could unlock the next stage

Looking towards Sibos 2027 in Singapore, Behzad expects further development in both digital money and tokenised assets. On the money side, he expects more interest in on-chain cash through stablecoins, tokenised deposits and central bank digital currencies, supporting more foreign-exchange payment-versus-payment and other transactions that can settle on-chain.

As more assets come on-chain, Behzad said the ability to settle them atomically, around the clock and with greater precision could accelerate adoption.

Behzad did not expect the market necessarily to reach that “hockey stick” moment within the next 12 months, but said it is accelerating towards it. For him, on-chain money is the “big unlock” for tokenised assets: as more forms of money and assets move on-chain, the next stage depends on being able to settle them safely across the different systems and infrastructure that institutions already use.