The EBA assesses potential benefits and challenges of tokenised deposits

The European Banking Authority (EBA) today published a Report to facilitate awareness of tokenised deposits, as well as assess their potential benefits and challenges. The Report also aims to promote convergence in the classification of tokenised deposits in contrast with electronic money tokens (EMTs) issued by credit institutions under the Markets in Crypto-Assets Regulation (MiCAR).

As part of the EBA's 2024-25 priorities on innovative applications, the EBA has analysed approaches to the tokenisation of deposits by credit institutions and their potential benefits and challenges. The tokenisation of a deposit - in the narrow sense of recording the deposit claim of a depositor against the credit institution on the distributed ledger technology (DLT) instead of a traditional ledger - does not per se alter the fundamental nature of the claim and thus its regulatory qualification as a deposit.

To-date, the EBA has identified very few cases of tokenised deposits. Meanwhile, interest from credit institutions appears to be growing. Potential benefits include programmability and automation of transfers, while potential challenges include issues relating to consumer protection, operational risk, and the application of the anti-money laundering and countering the financing of terrorism framework.

In this light, the EBA will continue to monitor market developments and promote discussion on potential benefits and challenges, as well as on issues relating to regulatory classification as compared to EMTs, which are in scope of MiCAR.

Background and next steps

The EBA has a statutory duty to monitor and assess market developments, including technological innovation and innovative financial services in accordance with Article 9(2) of its Founding Regulation (Regulation (EU) 1093/2010). The EBA's priorities on innovative applications for 2024-25 included the monitoring of tokenisation, specifically with regard to tokenised deposits.

The acceptance of deposits and other repayable funds from the public characterises the activity of credit institutions in the EU and the consequent regulatory treatment under the Capital Requirements Directive and Regulation (Directive (EU) 2013/36/EU and Regulation (EU) 575/2013). Therefore, activities involving tokenised deposits, since already regulated, are excluded from the scope of MiCAR.

The EBA, together with the other European Supervisory Authorities, are tasked to promote convergence on the classification of crypto-assets, including those excluded from the scope of MiCAR, as per Article 97 of that Regulation.

The EBA will continue to monitor market developments as part of its ongoing monitoring of innovative activities in the EU banking and payments sector.

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