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Cryptocurrency could change how financial assets are issued, transferred and settled, but it is not one technology or one kind of money. Unbacked crypto-assets, stablecoins, tokenised bank deposits and securities, and central-bank money carry different claims and risks. The likely transformation is conditional: faster or more automated transactions will matter only if legal rights, liquidity, oversight and the systems connecting platforms work reliably.
What cryptocurrency, stablecoins, DeFi and tokenisation mean
Cryptocurrency generally refers to digital assets that use cryptography and distributed-ledger systems to record or validate transactions. Bitcoin and similar assets are not claims on an issuer to redeem them for a fixed amount of currency. Their prices can fluctuate sharply, and their value is not guaranteed by a reserve or a bank deposit.
Related financial technologies are often grouped together, but they are not interchangeable:
- Stablecoins are digital tokens designed to maintain a value, commonly against a national currency. Their ability to hold that value depends on the assets backing them, the market in which they trade and the issuer’s ability to meet redemptions.
- Decentralised finance (DeFi) uses software protocols and digital assets to provide functions such as trading, lending or borrowing, often without the familiar intermediaries of conventional finance. The degree of decentralisation and the parties able to change a protocol vary.
- Tokenisation represents an asset or claim as a digital token on a ledger. The underlying asset might be a bank deposit, a security or something else; putting a claim on a ledger does not, by itself, change who legally owes the value or what rights the holder has.
The Financial Stability Board treats crypto-assets, stablecoins and DeFi as connected areas that policymakers should assess together, rather than as synonyms. Its overview of crypto-assets and global stablecoins also describes uneven implementation of the international policy framework.
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How these technologies could change financial transactions
In conventional finance, a transaction can involve separate records, intermediaries and settlement steps. A shared ledger can bring asset records and transfer instructions into a common system. Software can also attach rules to a transaction—for example, requiring a condition to be met before assets move. If the systems and legal arrangements support it, a trade, transfer of ownership and payment could take place as one coordinated process rather than through separately reconciled steps.
As Tobias Adrian of the International Monetary Fund put it on July 2, 2026: “Tokenization embeds ownership and transfer directly within the asset itself, enabling smart contracts to execute trades, transfer ownership, and move payments simultaneously on a shared ledger.” The IMF describes this as an architectural change, with important choices about settlement assets, interoperability, code governance, legal frameworks and liquidity backstops. Read the full IMF discussion of tokenisation and financial architecture.
Potential applications include issuing or transferring securities, settling transactions, recording deposits and automating collateral or payment rules. These are possible capabilities, not proof that all markets can already use them at scale. A ledger may reduce reconciliation steps, but it does not eliminate the need to verify assets, manage liquidity, resolve disputes or connect to other platforms.
What might improve—and what could limit the benefits
Potential efficiency gains
- Fewer hand-offs: A shared record could reduce the need for different institutions to reconcile separate versions of a transaction.
- Coordinated settlement: A transaction can be designed so the asset transfer and payment occur together, limiting the time one party has delivered while the other has not.
- Programmable rules: Code can automatically apply agreed conditions, such as releasing collateral when a payment is confirmed.
- New access and operating models: Digital systems may enable services or transfer arrangements that are difficult to offer through existing infrastructure, depending on local rules and reliable ways to exchange tokens for ordinary money.
Why a faster ledger is not automatically a better financial system
Near-continuous settlement can make liquidity demands more immediate: participants may need funds available at different hours than they do in systems with limited settlement windows. A network can also create new dependencies on code, platforms and service providers. If systems cannot communicate, a token on one platform may not move easily to another. If legal ownership or final settlement is uncertain, a technically completed transfer may still leave important questions unresolved.
The Bank for International Settlements’ Financial Stability Institute says financial-stability risks from distributed-ledger tokenisation were minimal in its August 2025 assessment, in part because activity remained small, concentrated in permissioned platforms and not highly interconnected. It warns that scale, complexity and insufficient oversight could change that assessment. Its summary covers tokenisation of financial assets, not crypto-assets or central bank digital currencies. See the BIS Financial Stability Institute executive summary.
What is the difference between the main types of digital financial claims?
A token’s label does not tell you who owes the holder money, whether it can be redeemed, or what happens if the issuer or platform fails. Those details depend on the instrument and its legal arrangements.
| Instrument | What the holder has a claim on | Key questions |
|---|---|---|
| Unbacked crypto-asset | Typically no issuer promise to redeem it for a fixed amount of money. | What determines its market value? Where is it traded and held, and what protections apply? |
| Stablecoin | A token issued under arrangements intended to keep its value near a reference currency; redemption rights and backing depend on the issuer and applicable rules. | What assets back it? How quickly and under what terms can it be redeemed? Can reserves be sold in stress? |
| Tokenised commercial-bank deposit | A bank-deposit claim represented on a ledger; the bank remains the debtor under the relevant legal arrangement. | Is the deposit claim legally enforceable, and how does it settle or transfer across platforms? |
| Tokenised security | A security or a representation of a security recorded or transferred using tokens; the token does not by itself settle what ownership rights attach. | What asset and rights does it represent? Which records establish ownership and settlement finality? |
| Central-bank money | A claim on a central bank. If represented in tokenised form, the form of access and settlement depends on the specific arrangement. | Who can use it, and how does it connect to commercial-bank money and other systems? |
This distinction matters in practice. A stablecoin is not the same thing as a bank deposit, and a tokenised security is not necessarily a payment instrument. The IMF and BIS both emphasise the importance of the settlement asset, liquidity arrangements and enforceable rights when assessing tokenised finance.
Are stablecoins becoming a common way to pay?
Stablecoins can be used to transfer value on digital-asset networks, but reported transaction volume does not establish that people are widely using them to pay for ordinary goods and services. In remarks dated August 7, 2026, the IMF said that some sources put stablecoin transaction volume above $30 trillion in 2025, including $6.1 trillion in cross-border activity. The IMF cautioned that much of this activity occurs within crypto markets and may involve bots and algorithmic arbitrage. It cited a separate BIS estimate of $390 billion in payment-related stablecoin flows in 2025; that is a different measure, not a direct breakdown of the larger figure. See Dan Katz’s IMF remarks on stablecoins.
The same August 2026 remarks put stablecoin market capitalisation at around $300 billion, relatively flat over the preceding year after nearly tripling between 2021 and 2025. Nearly 99 percent were denominated in US dollars. Market capitalisation measures the value of tokens in circulation, not how often they are used for payments.
For an individual sending money, the relevant comparison is the total cost and reliability of the transfer, not just the network fee. The IMF cited an average global remittance cost of 6.5 percent and said stablecoin costs vary by corridor, including on- and off-ramp fees and exchange-rate differences. A transfer may be quick on a blockchain yet still be costly or inconvenient to convert into local currency. Whether it is useful depends on the recipient’s access to a suitable service, local rules and the available alternatives.
What risks should users and financial institutions consider?
Redemption, liquidity and market risk
A stablecoin can trade below its target value if confidence falls or holders try to redeem at once. Parity depends on reserve quality, market liquidity and issuer resilience; even fully backed stablecoins have been vulnerable under stress. More broadly, leverage and maturity mismatch can amplify losses when assets cannot be sold quickly enough to meet liabilities.
Technology, governance and operational risk
Smart-contract errors, compromised keys, weak governance and failures at custodians or other service providers can disrupt access or transfers. Oracles—which provide external information to a protocol—and bridges that connect separate networks can become important points of failure. Complexity and opaque connections between platforms may make it difficult to see where risk has accumulated.
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Consumer, market and monetary risks
Crypto and DeFi markets can involve information asymmetries and inefficient trading, according to a 2025 BIS paper by Matteo Aquilina, Giulio Cornelli, Jon Frost and Leonardo Gambacorta. The authors also discuss cryptoisation risks in emerging markets: wider use of foreign-currency-linked stablecoins could affect monetary conditions, depending on the country’s economic framework, financial-market structure and local alternatives. The paper notes that its views do not necessarily represent the BIS or its member central banks. Read the BIS paper on crypto, DeFi and financial stability.
The FSB identifies broader policy concerns that can include consumer and investor protection, market integrity, anti-money-laundering and sanctions compliance, tax evasion, capital-control circumvention and illegal securities offerings. These are risks for oversight to address, not characteristics that should be assumed of every user or protocol.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How regulation differs across regions
There is no single global crypto law. Rules and implementation differ by jurisdiction and continue to develop.
- United States: On March 17, 2026, the Securities and Exchange Commission announced an interpretation, with Commodity Futures Trading Commission guidance, on how federal securities laws apply to certain crypto-assets and transactions. The SEC described a taxonomy including digital commodities, collectibles, tools, stablecoins and digital securities, and addressed airdrops, protocol mining, staking and wrapping. This is a US agency interpretation announced on that date, not a rule for other countries; the SEC release is not a substitute for checking the operative legal text or getting advice about a specific activity.
- European Union: The European Commission describes the Markets in Crypto-Assets Regulation (MiCA) as covering crypto-assets and related services not covered by other EU financial-services laws. Its page lists consultations launched May 20, 2026, to review MiCA, with an August 31, 2026 end date. Consult the European Commission’s crypto-assets page for current materials; the consultation timeline alone does not establish what changes, if any, were adopted.
- International coordination: The FSB’s 2025 thematic peer review reported progress alongside significant gaps and inconsistencies in implementing the global framework. A service’s availability or protections therefore cannot be inferred from rules in another country.
How to judge whether a financial innovation is useful
For a consumer, business or policymaker, the important question is not simply whether a product uses a blockchain. Assess the claim and the system around it:
- Know what the token represents: Identify the issuer or debtor, the underlying asset, and any enforceable right to redemption or ownership.
- Check how it settles: Find out what asset completes payment, when settlement is final, and whether that settlement asset remains available under stress.
- Understand liquidity and exit routes: Consider redemption terms, market depth, fees and the practical ability to convert into local money.
- Look at governance and operations: Identify who can change the code or freeze activity, who controls keys, and which custodians, oracles, bridges or platforms are essential.
- Test interoperability and legal certainty: Ask whether assets can move between systems and whether the relevant ownership and settlement rights are recognised where the parties operate.
- Separate genuine use from activity counts: Trading volume or token transfers alone cannot show that a service is reducing costs or improving access for end users.
Cryptocurrency and tokenisation could reshape parts of finance without replacing banks, public money or existing payment systems. Whether the changes benefit users will depend on the quality of the claims, legal protections, liquidity, interoperability and operational safeguards—not on the novelty of the ledger.
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