In a report published on Thursday, KPMG suggested that these forms of digital money will exist side by side rather than one dominant option. Although their uses overlap, the report predicts that users will gravitate towards the most efficient and automated solutions.

KPMG compiled its views based on interviews and events focused on digital assets hosted by the firm. TradFi offers a comprehensive perspective on the current market outlook for digital currencies as it includes fintech and crypto-specific companies.

Regarding CBDCs, participants emphasized that widespread testing and pilot programs indicate that central banks and governments approve the transition to a tokenized financial system.

According to the World Economic Forum (WEF), central banks around the world are showing strong interest in digital currencies. Nearly all of them, 98%, are exploring this concept through research, pilot programs, or even launching their own currency.

According to KPMG, banks appear enthusiastic about the potential of digital currencies for businesses (from bulk to wholesale CBDCs). But doubts remain about an imminent widespread launch for consumers (retail CBDCs). This skepticism stems from a combination of economic and political uncertainties and technical challenges that need to be addressed.

Some participants argued that CBDCs do not have a clear advantage over existing digital options such as stablecoins and tokenized deposits. They believe these alternatives could provide similar benefits and somehow make CBDCs redundant. Meanwhile, participants highlighted tokenized deposits as an attractive option for banks. They find these to be highly conducive to experience due to their seamless integration with existing regulations. They are optimistic that Distributed Ledger Technology (DLT) will significantly improve traditional deposits.

This improvement will likely occur through faster and more automated cross-border payments, ultimately leading to lower costs and new opportunities.

Not everyone agreed on the purpose of tokenized deposits. Some have raised questions about whether these will be just digital cash or take on a different role, such as collateral. The report points to stablecoins so far as the most promising form of digital money that meets certain needs. While their initial use was observed in speculative crypto trading, participants believe they have long-term value in established areas such as cross-border payments.

Many participants viewed stablecoins as a way to solve problems in other industries, such as enabling instant settlements (T+0) through a atomic transaction process. However, they cautioned against investing heavily in updating existing systems as a more comprehensive DLT transition is likely soon.

Still, people worry about how governments will regulate them, how reserves will be managed, and how stablecoins will cope with excess demand if people want their money back.

KPMG predicts that in the near future, more banks will offer tokenized deposit solutions and use stablecoins more widely. In the coming years, CBDCs are expected to further fuel global digital currency growth.