A Bank of International Settlements (BIS) working paper compared models of private tokenized money in terms of their singleness as a complement to a central bank digital currency.

Tokenization is “the process of representing claims in a digital form that allows them to be transacted on programmable platforms using smart contracts,” the paper said. Tokenized money can be a bearer instrument, where the claim on the issuer is transferred without affecting the issuer’s balance sheet. Stablecoin is an example of this.

Bearer instruments were prevalent in the days of “free banking” in the United States before the creation of the Federal Reserve, when money could be discounted by its receivers, the authors of the paper wrote. They drew a parallel between that situation and stablecoins depegging on permissionless exchanges.