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

A bank is evaluating three forms of digital money for settling tokenized asset trades: a fiat-backed stablecoin issued by a private firm, a wholesale central bank digital currency (CBDC), and a tokenized commercial bank deposit. Which of these represents a direct claim on the central bank and therefore carries no credit risk to the issuer?

A wholesale CBDC is the correct answer because it is a direct liability of the central bank, making it risk-free settlement money. Stablecoins and tokenized deposits are claims on private issuers or commercial banks, so holders remain exposed to the credit and liquidity risk of those issuers.

  1. AFiat-backed stablecoin issued by a private firm
  2. BWholesale CBDCCorrect
  3. CTokenized commercial bank deposit
  4. DAll three carry equal issuer credit risk

Explanation

A wholesale CBDC is a liability of the central bank, so it is settlement money with no issuer credit risk. Stablecoins are claims on a private issuer and its reserves, and tokenized deposits are claims on a commercial bank. Therefore the other forms carry issuer credit risk.

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