Bearer tokenized deposits share parity and run risks with EMTs
Bank-issued electronic money tokens and bearer tokenized deposits share near-functional economic equivalence and identical stability risks, according to a Banca d'Italia study. The authors argue that unregulated bearer deposits require the same prudential and guarantee exclusions.
Design features dictate stability
Analyzing tokenized money under MiCAR, Giuseppe Ferrero and Federico Guerra show that monetary stability depends on bearer design and settlement access rather than underlying technology.
While non-bearer tokenized deposits settle within the two-tier banking architecture and retain deposit guarantee coverage up to €100,000, bearer variants trade autonomously.
Such bearer instruments introduce secondary-market pricing frictions, with declared redemption windows ranging from under one day to over twenty business days across euro issuers.
Under Basel standard SCO60.107, untracked bearer holdings must be classified as unsecured wholesale funding, triggering a 100 percent liquidity run-off rate.
From wildcat notes to liquidity drains
The authors draw parallels to nineteenth-century US banknotes, where redemption delays created persistent discounts from par.
In the EU, electronic money institutions face reserve mandates requiring 30 to 60 percent of backing in bank deposits.
This rule imposes a 100 percent outflow penalty on custodian banks, creating an unintended liquidity drag on credit.
Meanwhile, euro-denominated tokens represent less than 1 percent of the global stablecoin market, weighed down by MiCAR's ban on token remuneration.
Same risk, missing rule
Leaving bearer tokenized deposits outside MiCAR invites obvious regulatory arbitrage.
If banks can circumvent remuneration bans and liquidity haircuts by simply rebranding tokens as deposits, financial stability safeguards unravel.
European authorities must close this classification loophole before private issuance scales.