Digital money is pushing banks toward making decisions about infrastructure well beyond whether to issue a token. Among the decisions that need to be made: Which forms of digital money belong inside their own relationships, which need broader distribution, how different networks connect and what controls must follow a transaction when money settles in real time.
Jon Eisenstein, SVP, Product and global head of Digital Assets & Embedded Finance at FIS, traces the shift to three developments: convergence between decentralized and traditional finance, regulatory changes and better access to the infrastructure connecting them.
“There’s convergence,” Eisenstein told PYMNTS, citing DeFi technologies and use cases moving toward mainstream finance, along with “big changes in regulation,” and there is also the consideration of “the accessibility of the infrastructure itself.”
Customers once had to move between separate environments to access traditional bank assets and cryptocurrency or DeFi assets, setting up wallets and accounts outside their existing banking relationships. Eisenstein said those environments can now work together more readily. Investment in blockchains and bank connections has also improved their performance and control.
Different Forms of Digital Money
Banks still have to decide which form of digital money fits a particular job.
A single-bank tokenized deposit is backed by the issuing bank’s deposits and can serve transactions within its existing relationships. Network tokenized deposits can extend that model by bringing banks together under common operating principles for tokenizing and exchanging deposits.
“For banks, and anyone operating with a tokenized deposit, frankly, having that level of backing and good funds and assuredness around that token is essential for it to be trusted,” Eisenstein added.
Elsewhere, “stablecoins are great for reach across multiple different networks,” Eisenstein said. “So if you want that endpoint distribution, stablecoins are good for that.”
Technology can also change the mechanics beneath those transactions. Blockchain-based systems reduce the amount of payment, messaging, reconciliation and audit layers involved. Conditions such as delivery versus payment can be coded into transactions so they complete in full or unwind safely.
Moving from experimentation to production shifts attention toward funding, authority, compliance and recovery.
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Real-time settlement can allow treasurers to maintain positions without waiting for a netting window or batch process. Faster settlement also means funds can leave immediately, placing more weight on the controls surrounding each transaction.
“You don’t necessarily need to have someone who’s a blockchain expert,” Eisenstein said. Banks instead need people who understand “real-time finality and settlement” and can determine which processes and controls have to change.
Interoperability adds another requirement. Connecting a bank core to a blockchain, or one blockchain to another, is technically possible, but banks still need to know whether another network will recognize an asset and how transactions will behave when networks operate under different settlement rules.
A token’s value to a bank, in other words, depends partly on its reach. Eisenstein said an isolated tokenized deposit or stablecoin may provide value for experimentation, but broader utility requires interoperability between institutions and networks.
Banks bring an established advantage into digital money: trust built through regulation, controls and customer relationships. Eisenstein does not consider that position permanent.
FinTechs and digital-asset companies are seeking charters, buying banks and moving closer to regulated financial services.
“So that trust is there for now, but it’s also something that could erode very quickly,” Eisenstein said.
Artificial intelligence agents could put those controls to a new test. Eisenstein expects AI agents to execute transactions for consumers while also helping banks manage treasury activity, money flows and payment routing. Digital money is suited to such activity because it can be programmable and accessible without requiring an agent to navigate a conventional payment interface for every transaction.
“These agents have to have the right kinds of permissions and authority to make those payments,” Eisenstein said.
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