Institutional markets will need settlement rails that let different types of digital money move seamlessly — and around the clock — if tokenized finance is to reach scale, Lynq CEO Jerald David told crypto.news. “I do not expect a single form of digital money to replace all others,” David said, arguing that stablecoins, tokenized deposits, tokenized money-market funds, potential CBDCs, and traditional bank money will each play distinct roles depending on counterparty, jurisdiction and transaction type. The real challenge, he said, is the plumbing that links them. Why rails matter David’s comments follow an Aug. 12 update on Phase 2 of the Bank of England’s Digital Pound Lab, where a consortium including NOBO Finance, Dun & Bradstreet and Polygon Labs is testing whether private stablecoins and a simulated digital pound can coordinate within the same cross-border trade-finance flow. In the pilot, an exporter takes an advance via a stablecoin while a UK importer completes final settlement in simulated digital pounds — both coordinated within one transaction rather than one side waiting for the other. That coordination, David says, is the core issue. Institutions may have enough capital on paper, but not “in the right form or in the right place at the point it is needed.” When different forms of money live on separate rails, firms often pre-position liquidity across venues or counterparties, locking up capital that would otherwise be productive. Real-world friction points The fragmentation shows up across funding, collateral management and settlement: - Crypto markets trade 24/7, while traditional bank systems have cut-offs and business hours. An institution hit with a margin call overnight may have the assets to meet it but can’t move them to the counterparty until banks reopen. - Firms commonly hold a mix of instruments — bank deposits for day-to-day business, stablecoins for blockchain-native activity, tokenized money market fund shares for short-term yield — and lack reliable ways to shift value between those instruments when required. Polygon, which supplies the stablecoin settlement and smart-contract layer for the BoE test through its Open Money Stack, has framed the same problem: bank money, stablecoins, tokenized deposits and a potential digital pound currently operate on systems that don’t “talk” to each other easily. In the BoE pilot, the simulated digital-pound portion remains on the Bank’s demonstration ledger rather than moving onto Polygon, underscoring the interoperability questions. Lynq’s experience and market responses Lynq — which runs a broker-dealer settlement network for institutions that need yield, funds transfers and digital-asset settlement — encounters the mismatch directly, David said. “The practical issue is not so much creating another form of digital money, but ensuring that capital can move to where it is required, at the time it is required.” Banks are responding. An Aug. 4 report on Wells Fargo’s tokenized deposits revealed plans to pilot 24/7 transfers on the bank’s blockchain platform for selected corporate clients via a USD-GBP corridor, with broader rollouts to more clients, countries and currencies expected through 2027. Meanwhile, in June, major U.S. banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — backed a shared tokenized-deposit network targeted for 2027 that would let bank-issued digital money move across participating lenders rather than remaining locked inside each bank’s internal rails. Different instruments, different trade-offs David and others stress that coexistence, not consolidation, is the likely outcome. Each form of digital money has different legal and risk characteristics: - CBDCs would be a direct claim on a central bank. - Commercial bank tokenized deposits would remain liabilities of the issuing bank. - Stablecoins depend on private issuers and their reserve arrangements. - Tokenized money market funds represent shares in cash-management vehicles and may carry yield but don’t always act like bank money for payments. All of these require common technical, legal and compliance standards before they can interoperate at scale. Consortium details and next steps In the BoE consortium, NOBO Finance leads the trade-finance design and a second workstream on a portable credit profile for small businesses. Dun & Bradstreet contributes verified company identity and credit data, while Polygon provides the blockchain infrastructure to let that profile travel with the payment. The lab supplies APIs, wallets, a demonstration ledger, and smart-contract tooling — but uses no real customers or real money and is not a regulatory sandbox. The Bank of England has not decided whether to issue a digital pound. The Bank and HM Treasury will decide on next steps later in 2026; any CBDC introduction would require primary legislation in Parliament. Phase 2 of the lab remains a controlled three-month test to inform the Bank’s thinking on technology, payment services and potential intermediary business models. Global context Work on cross-border and cross-asset interoperability is underway internationally. The Bank for International Settlements’ Project Agorá prototype showed tokenized commercial bank deposits settling against tokenized central bank reserves across jurisdictions — a trial involving seven central banks and more than 40 financial institutions, with later stages expected to handle transactions using real value. Bottom line As digital money proliferates, the pressing need is not choosing a winner among stablecoins, tokenized deposits or CBDCs, but building interoperable rails and standards that let those instruments interoperate — and move value 24/7 when markets do. Without that, institutions will continue to face liquidity mismatches and locked-up capital, even as trading becomes borderless and round-the-clock. Read more AI-generated news on: undefined/news