Banks may experiment with partial reserve stablecoins, challenging the practices of the encryption industry.

Core Dynamics: Banks Explore the Advantages of Encryption Efficiency According to analysts speaking to DL News, banks are actively embracing blockchain technology, valuing its speed and efficiency advantages. In the future, banks may start to experiment with issuing tokenized assets (such as stablecoins) that adopt a fractional reserve system, which will directly challenge the prevailing norms of the current encryption industry.

Current Situation: Fully Collateralized vs. Banking Efficiency Currently, the majority of stablecoins circulating in the market (such as USDT, USDC) are fully backed by fiat currency (100% reserve). However, compared to traditional banks that operate on a fractional reserve basis, this model appears to be less efficient. Banks only need to keep a small portion of deposits as reserves, while the majority can be used for lending profits.

Potential Advantages of Banks: Fractional Reserve Stablecoins The founder of stablecoin infrastructure company Multiliquid, Will Beeson, pointed out that if banks can issue tokenized dollars that play a role similar to fully collateralized stablecoins (i.e., bank stablecoins), but only need to hold a fraction of reserves as support, it would give them a significant competitive advantage.

Bank Actions: Giants are Joining the Game Recently, several large banks have expressed their intention to issue their own stablecoins:

• In June, France's Société Générale announced plans to launch a stablecoin pegged to the US dollar.
• Bank of America CEO Brian Moynihan stated that the bank is also considering creating a stablecoin once key legislation is passed.
• JPMorgan Chase has launched a product similar to stablecoins called "JPM Coin", and has cautiously referred to it as "tokenized deposits".

Analysis of the Partial Reserve System: Opportunities and Risks Coexist

• Mechanism: Fractional Reserve Banking is a widely used system where banks only need to hold a portion of deposits as reserves, while the rest can be lent out. This allows banks to utilize idle funds to generate returns and promote economic growth through lending.
• Risk: There is a theoretical hazard—if all depositors simultaneously request cash withdrawals (i.e., a bank run occurs), the bank will go bankrupt.
• Guarantee: To prevent system collapse, the government mandates banks to hold minimum reserves and provides insurance for bank deposits (such as FDIC).

New Challenges Brought by Blockchain: Computational Models Need Adjustment James Brownlee, co-founder of the stablecoin infrastructure company Harbour (who has experience working at a British bank), stated that banks must be particularly cautious when trying to implement blockchain-based fractional reserve products (such as fractional reserve stablecoins). Banks rely on well-established reserve requirement calculations to ensure they have sufficient funds to meet depositor withdrawal demands. However, Brownlee pointed out that tokenizing deposits and putting them on-chain would impact these calculation models.

Potential Benefits: Distributed Holding or Risk Reduction? However, Brownlee believes this may not necessarily be a bad thing. Allowing a broader, distributed base of holders to hold tokenized bank deposits could actually reduce systemic risk.

Key Distinction: Tokenized Deposits vs. Stablecoins

• Stablecoins: Typically imply the concept of 100% full collateral representing fiat currency. Leading issuers Tether and Circle adopt this model, and regulations for stablecoins in multiple countries also require that they must be fully backed by cash or highly liquid cash equivalents.
• Tokenized Deposits: are more like a debt certificate for deposits in banks that adopt a fractional reserve system. Brownlee emphasizes that Morgan Stanley's choice to call its product "tokenized deposits" is a cautious move, as it is essentially an on-chain "IOU" for the bank's fractional reserve deposits.

Future Impact and Model Integration

• Regulation and Requirements: Beeson from Multiliquid believes that with banks playing a clear role in the issuance and use of tokenized dollars, the distinction between fractional reserve requirements and full reserve requirements will have significant implications.
• Possibilities of Hybrid Models: Brownlee proposed a possible path for banks to merge the existing fractional reserve system with encryption:
  • Circulating Funds (Money in Transit): Fully collateralized stablecoins are needed to ensure immediate settlement and finality when transferring between clients and banks or across institutions.
  • Money at Rest (Money at Rest): Once the funds reach their bank destination, they can be converted into partially backed tokenized deposits. Because once the funds enter the bank account, they are immediately protected by government deposit insurance.
  • Core User Needs: Brownlee summarized: "In many cases, especially in G7 countries, the United States, and Europe, the deposited funds will be this type of tokenized deposits. The circulating funds are stablecoins—fully collateralized." What users ultimately want is "the dollars in their bank accounts."

Encryption User Concerns:

• What impact do banks entering the stablecoin market have on decentralized stablecoins (such as DAI)?
• Partial Reserve Bank Stablecoins will they increase systemic risk?
• Tokenized deposits are they equivalent to Central Bank Digital Currency (CBDC)?
• How does regulation (such as the "Payment Stablecoin Act") shape the landscape of encryption banking services?
• How is the asset security of users holding bank stablecoins supported by partial reserves guaranteed?
• What impact will this have on CEX/DEX liquidity and stablecoin yield?