Electronic money tokens (EMTs) vs tokenized deposits: a comparative economic assessment

This paper compares euro-denominated electronic money tokens (EMTs) - issued under MiCAR by credit institutions or electronic money institutions - with tokenized deposits, a form of privately issued tokenized money for which there is currently no dedicated EU regulatory framework. Our analysis shows that the key determinant of an instrument's monetary and financial stability properties is not the underlying technology, but two design features: whether the instrument is bearer or non-bearer, and whether settlement occurs within or outside central bank infrastructure. Non-bearer tokenized deposits settle through the existing two-tier system and are consistent with the singleness of money; bearer instruments - both EMTs and bearer tokenized deposits - can trade on secondary markets at prices that deviate from par. By applying the 'same activity, same risk, same regulation' principle, the paper finds that bank-issued EMTs and bearer tokenized deposits are economically equivalent and should be treated consistently in terms of remuneration, prudential treatment and deposit guarantee scheme coverage, whereas bearer tokenized deposits currently fall outside any instrument-specific regulatory framework. The paper concludes that the policy implications of tokenized money instruments depend not on the underlying technology but on three structural features - holder identifiability, redemption design and the scope of end-user protections - combined with the regulatory framework in which they operate.