Skip to content

FRM Part II · FRM Exam Part II · Tokenization and Financial Market Inefficiencies

A bank considers tokenizing deposits versus using a stablecoin issued by a non-bank for settling tokenized securities. From a financial stability and regulatory perspective, which statement is MOST accurate?

Tokenized bank deposits are claims on a regulated bank inside the prudential and deposit-protection framework, while non-bank stablecoins depend on reserve quality and redemption arrangements that may sit outside it. So stablecoins can carry redemption and run risk that tokenized deposits generally do not.

  1. ATokenized bank deposits remain a claim on a regulated bank within the existing prudential and deposit-protection framework, whereas non-bank stablecoins may carry redemption and reserve-quality risk outside itCorrect
  2. BStablecoins are always safer because they are fully reserved by definition
  3. CTokenized deposits cannot be used for settlement because they are not money
  4. DBoth carry identical regulatory treatment in every jurisdiction

Explanation

Tokenized deposits are liabilities of regulated banks, so they sit within prudential supervision and, where applicable, deposit insurance. Non-bank stablecoins depend on reserve quality and redemption promises that may fall outside such frameworks. Reserving is not guaranteed by definition, tokenized deposits can settle, and treatment differs across jurisdictions.

Did you get it right without looking?

One question tells you little. A timed set on Tokenization and Financial Market Inefficiencies shows your real accuracy, how long you take and where you lose marks.

Practise Tokenization and Financial Market InefficienciesFree diagnostic mock

More Tokenization and Financial Market Inefficiencies questions