Not All Digital Money Is Created Equal

Stablecoins. Tokenized deposits. Central bank money. Bitcoin.

The conversation around digital money often makes it sound as though these different forms of money are competing for the same prize. Which one will win? Which one will become the dominant payment rail? Which one will eventually replace the others?

During our latest episode of the Bitcoin, Fiat & Rock'n'Roll podcast, Jai Massari, Of Counsel at Arcturus and former Partner at Davis Polk who worked extensively on Facebook’s Libra project, offered a much more nuanced way of looking at the question.

Perhaps there doesn't need to be a winner at all.

Just as we already use cash, commercial bank deposits and central bank money for different purposes today, the emerging digital financial system will likely rely on several forms of money alongside one another. The interesting question, then, isn't which one is superior.

It's understanding where their differences actually matter.

Stablecoins Were Never Just About Crypto

Jai has been thinking about that question for longer than most.

She began working on crypto regulation in 2014 and became interested in stablecoins as they emerged several years later. At the time, their purpose was relatively narrow: allowing traders to move dollar value quickly between crypto exchanges.

But there was something about the model that caught her attention. Stablecoins appeared capable of doing much more than facilitating crypto trading.

That curiosity eventually led to a much bigger question: what actually makes money work?

Who can issue it? Why do we trust it? How does it move? And what makes one form of money useful in situations where another isn't?

Those questions would later become particularly relevant during Jai's work on Libra, where she helped develop the legal architecture for an entirely new global payment network.

Looking back, Libra got plenty wrong. But Jai believes one thing it got remarkably right was the basic architecture of a stablecoin: reserve design, redemption mechanics, capital and liquidity requirements. Many of those same concepts can now be found in frameworks such as MiCA and the GENIUS Act.

The technology, as she put it, was never really the hardest part. The legal, regulatory and political scaffolding around it was.

That remains true today.

Different Money, Different Jobs

One of the most interesting parts of our conversation came when Jai compared stablecoins with tokenized commercial bank deposits.

They may both exist on a blockchain, but economically they are very different things.

A bank deposit is what Jai calls "credit money." Its value ultimately depends on the bank that issued it. The reason deposits from different banks feel interchangeable today is because decades of clearing, settlement and central bank infrastructure sit behind them.

A well-regulated stablecoin is designed differently. Rather than relying on the broader balance sheet of a bank, it is backed by a standardized pool of highly liquid reserve assets designed to support redemption.

That difference changes what each form of money can do.

Tokenized deposits remain connected to bank accounts and the institutions issuing them. Stablecoins, meanwhile, can operate more like digital bearer instruments, moving peer-to-peer without requiring the same clearing and settlement infrastructure behind every transaction.

But that does not make stablecoins inherently better.

If two customers of the same bank want to transfer money between one another, there may be little reason to introduce a stablecoin at all. Existing bank money already does the job efficiently.

The picture changes when money needs to move across borders, between institutions that aren't well connected, or outside traditional banking hours.

That is where stablecoins start to become particularly interesting.

As Jai framed it, stablecoins make sense where speed matters enough to justify the additional cost and complexity.

It is a refreshingly practical way of looking at digital money. Rather than starting with the technology and searching for somewhere to use it, start with the problem and ask which form of money solves it best.

The Technology Is Ready. The Scaffolding Isn't.

If stablecoins are so well suited to some of these problems, why haven't they transformed payments already?

According to Jai, the answer has increasingly little to do with technology.

Payments rely on an enormous amount of invisible infrastructure. There are rules defining when a payment is final, what happens when something goes wrong, how assets are treated in bankruptcy, who carries liability and how participants in a payment network interact.

Most users never see any of this. But it is precisely what allows people and businesses to trust money enough to use it every day.

Stablecoins don't yet have the same depth of legal and commercial scaffolding.

This is also why regulation alone isn't enough. Countries are rapidly developing national stablecoin frameworks, but stablecoins are inherently global instruments. If those frameworks don't work together, there is a risk of recreating the very fragmentation blockchain technology was supposed to remove.

A stablecoin issued in Europe needs to be usable and redeemable elsewhere. Reserve requirements, redemption rights and insolvency treatment need to be sufficiently aligned that stablecoins issued under different regimes can actually function as equivalent forms of money.

Otherwise, we may end up rebuilding complicated clearing and settlement infrastructure on top of blockchain rails.

And at that point, it becomes reasonable to ask how different the system really is from the one we started with.

AI Brings the Same Question Back Again

Towards the end of the conversation, the discussion moved to agentic payments, but the underlying question remained surprisingly similar.

When AI agents begin making payments on our behalf, do we need an entirely new legal framework?

Jai's answer was characteristically lawyerly: it depends.

But her broader point was more interesting. New technology doesn't automatically require new laws. Concepts such as agency, contracts and fiduciary responsibility already give us tools for determining who can act on someone's behalf and who is responsible when things go wrong.

What does need to evolve is the infrastructure around those concepts.

Agents need to prove who they represent and what they are authorized to do. Jai sees verifiable digital credentials as a particularly promising way of making that possible, allowing authorization to happen upfront rather than requiring a human to authenticate every individual payment.

Done well, that could make payments not only more automated, but potentially safer.

The Future of Money May Be More Plural Than We Think

There is a tendency in technology to search for the thing that replaces what came before.

But perhaps that is the wrong way to think about digital money.

Stablecoins do some things exceptionally well. Tokenized deposits have advantages of their own. Central bank money will continue to play a fundamental role, while new technologies such as AI will create entirely new requirements around identity, authorization and payments.

The opportunity isn't necessarily to make one form of money win.

It is to build the legal, regulatory and technological infrastructure that allows each form to do the job it is best suited to do - and to move between them without recreating the friction we were trying to remove in the first place.

Because the future of money may not be about finding the perfect form of money.

It may be about finally having the right money for the right moment.

You can listen to the full podcast here.