The European Banking Authority (EBA) has released a comprehensive report aimed at enhancing awareness of tokenised deposits and evaluating their potential advantages and challenges. The report also seeks to foster alignment in how tokenised deposits are classified, particularly in comparison to electronic money tokens (EMTs) issued under Regulation (EU) 2023/1114 (EU) on markets in crypto-assets (MiCAR).
As part of its 2024-2025 priorities on innovative financial applications, the EBA has examined various approaches to the tokenisation of deposits by credit institutions. Tokenisation, in this context, involves recording a depositor’s claim against a credit institution using distributed ledger technology (DLT) rather than traditional ledgers. Importantly, this technological shift does not fundamentally change the nature of the claim or its regulatory classification as a deposit.
Currently, instances of tokenised deposits remain sparse, but interest among credit institutions is steadily increasing. The potential benefits of tokenisation include greater efficiency through programmability and automation of transfers. However, several challenges must also be addressed, such as consumer protection concerns, operational risks, and compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations.
Given the evolving interest in this area, the EBA has committed to closely monitoring market developments. It aims to facilitate dialogue around both the opportunities and challenges of tokenised deposits, as well as clarifying their regulatory classification in comparison to EMTs, which fall under the scope of MiCAR.
The EBA’s mandate includes the responsibility to monitor and evaluate market developments and innovations in financial services, as outlined in Article 9(2) of its Founding Regulation (Regulation (EU) 1093/2010). For 2024-2025, the EBA’s priorities explicitly include monitoring the tokenisation of deposits.
The acceptance of deposits and other repayable funds from the public is a defining feature of credit institutions in the EU and is subject to regulation under the Capital Requirements Directive and Regulation (Directive (EU) 2013/36/EU and Regulation (EU) 575/2013 respectively). Activities involving tokenised deposits, as they are already regulated, are excluded from MiCAR’s scope.
Nonetheless, the EBA and other European Supervisory Authorities are working to ensure the consistent classification of crypto-assets including those outside MiCAR’s remit.
As the financial sector continues to innovate, the EBA will maintain its active role in observing and assessing the implications of emerging technologies like tokenisation. This ongoing effort will help support the development of a robust and harmonised regulatory framework in the EU banking and payments landscape.
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Author: Dr Catriona Cuschieri