FDIC plans tokenized deposits insurance: what does this mean for users?

Short answer: you'll soon start seeing ads on why to use regulated deposit tokens and stablecoins because they are "insured."

Tokenized deposits or deposit tokens are becoming realer everyday. For those unaware of what they are, these are simply tokens (with value pegged to fiat currencies) on blockchains, representing deposits with a traditional bank like JPMorgan.

Unlike stablecoins, each deposit token mint is directly tied to a bank deposit and tokenized deposits allow banks to continually expand effective capital through fractional reserve banking, where they get to loan out more money as deposit grows.

JPMorgan expects that deposit tokens will surpass stablecoins in usage growth and is actively building infrastructures to capture the market.

The goal is to make deposit tokens the primary choice for payments as capital moves on-chain. This would allow banks like JPMorgan to keep significant control and be in position to make much more money.

I've written on a number of occasions on what we can expect from this. For today, the focus is on insurance:

The acting chair of the Federal Deposit Insurance Corporation (FDIC), the regulatory body overseeing banks in the US, is reportedly considering guidance for tokenized deposit insurance and plans to launch an application process for stablecoins by year’s end.

Acting FDIC Chair Travis Hill, who has made bullish statements about tokenization in the past, told the Federal Reserve Bank of Philadelphia’s Fintech Conference on Thursday that the regulator will eventually release guidance around tokenized deposit insurance, according to reports.

“My view for a long time has been that a deposit is a deposit. Moving a deposit from a traditional-finance world to a blockchain or distributed-ledger world shouldn’t change the legal nature of it,” Hill said, as reported by Bloomberg. - Cointelegraph report

The moment I read this, I thought "oh here comes the ads calling it the secure and smart choice," then I followed it up with a question to self: will Americans fall for it?

Or should I say the world, seeing that stablecoins are included and even deposit tokens could very much be release to the global market?

People don't realize it, but it is beyond crucial that crypto education makes it ways across every population globally because as TradFi comes on-chain, regulators in collaboration will seek to make these companies lead in many areas, so as to keep the tech from enably people break away from the chains of traditional finance.

Selling of the concept of the safe and secure (insured) stablecoin and deposit tokens to use will most certainly be one of many strategies that will be employed to get the masses to use token currencies that remains in TradFi control.

From the report above, you can clearly see how the chair of the Federal Deposit Insurance Corporation (FDIC) tries to convince the public that even when capital moves on-chain, it is still tied to traditional finance and so, should need it be safe or trustworthy.

I'll have to admit, it is rather a clever thing to say to make people remain trapped and trusting in TradFi.

The world needs to understand that completely detached economies and financial systems can be built atop crypto and blockchains and that insured deposits are not required because moving on-chain means moving to trust a different system for your money and that includes trusting a different governance system for building the economies around said money.

As an individual, expect ads that will tell you that if your stablecoins are not insured or your are not using deposit tokens (that will be insured by default), you're too exposed to risks, and should move to the regulated currency tokens.

The same way self-custody of several top-performing crypto assets will have traditional companies selling safe custody through giving up ownership and control, either with ETFs or whatever else that allows them be in control of said assets.

This is what will be sold to everyone, soon!

Posted Using INLEO