“Digital money” is an umbrella term. What separates one form from another is who owes you the money and on what terms. “Digital yield” is a separate question. An interest rate, reward, or investment return needs a source and conditions, and the digital form of a balance does not supply either one.
What “digital money” covers
The Board of Governors of the Federal Reserve System makes the broad point in its 2022 paper Money and Payments: The U.S. Dollar in the Age of Digital Transformation: “Consumers and businesses have long held and transferred money in digital form, via bank accounts, online transactions, or payment apps.” By that measure, most of the money people use every day is already digital. Blockchain tokens are one branch of a wider landscape.
The U.S. Treasury Borrowing Advisory Committee’s 2025 presentation, There Is a Wide Spectrum of Digital Money Implementations, sorts these forms by issuer and implementation. The table below applies the same logic: for each form, the first question is who issued it and what claim the holder has.
| Form | Who issues it | What the holder generally has | What the cited sources establish |
|---|---|---|---|
| Bank account balance | A commercial bank | A deposit claim on that bank | The Federal Reserve (2022) describes these as digital money people already hold and transfer |
| Payment-app balance | The payment provider, sometimes with a bank partner | A balance governed by the provider’s terms | Not stated for any specific provider; the terms determine the claim |
| Tokenized deposit | A commercial bank | A commercial-bank deposit liability represented on a blockchain | Modeled in a February 2026 Federal Reserve Bank of New York staff report |
| Stablecoin | A private issuer | A claim defined by the issuer’s redemption terms and reserve design | SEC Division of Corporation Finance staff statement, April 4, 2025, which covers only a defined category |
| Tokenized money market fund share | A fund sponsor | A share in a fund, whose value tracks that fund | Named as a category in the 2025 Treasury presentation; legal terms not stated in that presentation |
| Cryptocurrency | Varies; often no single issuer | A digital asset whose value is set by the market rather than an issuer’s redemption promise | Named as a category in the 2025 Treasury presentation |
| Central bank digital currency (CBDC) | A central bank, if one were issued | A direct liability of the central bank | The Federal Reserve’s CBDC page, last updated January 21, 2022, states that the Fed has made no decision to pursue or implement one |
Who owes you the money
The most useful test for any digital balance is liability: who must pay you if you ask for your money back, and under which terms. The label on the app matters less than the answer to that question.
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- Bank deposit: a liability of the commercial bank that holds it.
- Tokenized deposit: the same bank liability, recorded in a blockchain form.
- CBDC: a liability of the central bank. If one were issued, the central bank rather than a commercial bank or private company would owe the holder.
- Stablecoin: a claim on the issuer, to the extent its redemption terms provide one.
- Payment-app balance: an obligation of the provider, defined by its terms and any arrangements with partner banks.
Stablecoins: a peg is a design goal, not a guarantee
A stablecoin is designed to hold a steady value relative to a reference asset such as a currency, a commodity, or a basket. “Stable” describes that intended peg. It does not mean the market price can never move.
The SEC Division of Corporation Finance’s Statement on Stablecoins, dated April 4, 2025, describes reserve-backed and algorithmic designs and says the risks vary with the stabilization method and the reserves behind the coin. The statement’s limits matter. Its staff view that certain stablecoins are not securities applies to a particular class: U.S. dollar-referenced stablecoins that are redeemable one-for-one and adequately backed by reserves. It is a staff view, not a Commission rule or a binding legal determination. It should not be read as covering every stablecoin, or any arrangement that pays a yield.
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Four design features determine how a stablecoin behaves:
- Reserve design: what assets back the coin, and how liquid and reliably valued those assets are.
- Stabilization method: whether reserves or an algorithm does the work of holding the peg.
- Redemption rights: whether you hold a claim to redeem, and at what value.
- Access to redemption: whether ordinary holders can actually redeem, or only large intermediaries can.
Tokenized deposits and the policy debate
A tokenized deposit represents a commercial-bank deposit in blockchain form, so the liability stays with the bank. A stablecoin is a privately issued instrument with its own reserve and redemption structure. The two can look alike on a screen and still differ in who stands behind them.
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A February 2026 New York Fed staff report, Stablecoins vs. Tokenized Deposits: The Narrow Banking Debate Revisited (Staff Report 1179, by Xuesong Huang and Todd Keister), uses a model to examine how these arrangements could affect credit and welfare. Its conclusions depend on assumptions about regulatory costs and how banks might shift risk. Different assumptions lead to different results, so the report does not establish that one design always comes out ahead.
What a CBDC would be, and what is not yet decided
A CBDC would be digital central bank money, a direct liability of the central bank rather than of a commercial bank or private issuer. The Federal Reserve’s 2022 discussion paper outlines possible benefits, including a safe digital payment option and possibly faster cross-border payments. It also sets out open questions: privacy, illicit finance, financial stability, and how a CBDC would complement existing payments. The paper does not endorse a policy outcome.
The Fed’s public CBDC page, last updated January 21, 2022, says the Board has made no decision to pursue or implement a CBDC. That is the status the page reported at its update, not a current check of policy. Look for newer Federal Reserve statements before treating it as the present position.
Global activity is tracked in the Treasury Borrowing Advisory Committee’s 2025 presentation. Of 134 countries and currency unions tracked for CBDC development, it reports that 2% have launched a CBDC, 33% are in pilot, and 14% are in development. The presentation states that its market data is as of April 14, 2025. These figures are a dated snapshot, not 2026 counts.
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Where digital yield comes from
Yield is any return a product promises: interest, a reward, or an investment payout. Every yield has a source. Three common ones:
- Interest on a deposit-like product. The rate is set by the issuer or bank and is subject to that institution’s terms.
- Returns from an underlying fund. A tokenized fund share passes through the fund’s performance, which can rise or fall.
- Protocol staking rewards. Rewards come from a blockchain network’s activity and follow that network’s rules.
A token that represents a position does not create the return
The SEC Division of Corporation Finance’s crypto-assets FAQ, last updated September 28, 2026, explains that a staking receipt token merely evidences ownership of the underlying asset. It does not create, guarantee, generate, or set the amount of rewards. That is staff explanation about staking, not a legal conclusion about any particular offer, and it does not describe the terms of any specific product. The same principle applies to any tokenized wrapper: the token shows what you hold, but the return depends on what sits behind it.
A six-question check for any yield claim
- Who issues the product, and what legal claim do you hold against that issuer?
- What backs the instrument or funds the return?
- Can you redeem, how do you do it, and are there eligibility restrictions?
- What could change the value or the yield?
- What liquidity and operational dependencies does the product rely on?
- Is the quoted rate variable, conditional, or promotional?
The documents cited here do not list current provider rates, and nothing in them recommends a product. Apply the questions to the terms you are actually offered.
What can make a yield stop
- A variable rate falls, or a promotional rate ends.
- The underlying fund or asset loses value, so the return turns negative.
- Redemption is limited or delayed, so you cannot exit when you want to.
- The issuer or service fails, and the claim goes unpaid.
- Fees and costs absorb part or all of the return.
Deposit insurance is a separate question that this article does not address. Check the provider’s disclosures for any protection that applies to a specific balance.
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