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Bitcoin and cryptocurrencies in general are no longer the bright shiny new thing. The Journal of Economic Perspectives, where I work as Managing Editor, was describing and discussing the crypto world a decade ago. What happened to all those predictions that Bitcoin would rapidly displace existing currencies? In “Crypto, tokenisation, and the future of payments.” Stephen Cecchetti and Kermit L. Schoenholtz discuss what has held crypto back, and argue that the momentum for “stablecoins” is unlikely to improve upon the possibility of “tokenization” run by ginormous global financial firms like JP Morgan and Black Rock (CEPR Policy Insights 146, August 2025).

Why have cryptocurrencies like Bitcoin not taken off as their enthusiasts predicted? Cecchetti and Schoenholtz write:  

By some estimates, there are over 20,000 cryptoassets – instruments whose ownership is recorded on a ledger based on some form of cryptography (FCA 2023). At this writing, these have a cumulative value of about $4 trillion, with Bitcoin accounting for roughly 60% of the total. While it functions as a store of value, outside of the crypto world Bitcoin is still neither a common means of exchange nor a popular unit of account. … When historians look back at the decades following Bitcoin’s introduction, they will ask: “Why has crypto not ‘taken off’ in the way its creators and early backers hoped?” We offer three tentative answers.

First, despite the hype about the speed and efficiency of digital transactions, it turns out that transfers of Bitcoin and Ether – the leading cryptoassets – remain slow and costly. On 14 August 2025, it took an average of more than 15 minutes to confirm a Bitcoin transaction. And that time varies widely: on several days in September 2024, it took more than 2,000 minutes! This variation makes settlement and finality difficult to predict. Small retail payments are especially costly (say, 5% for a payment of $20) in part because even the limited number of retailers who are willing to accept Bitcoin
in payment typically do not wish to hold it.

Second, the competition from traditional finance is intense, helping to lower costs and speed up payments. Consider, for example, the world of cross-border remittances. Critics argue that costs in the traditional sector are stubbornly high. In fact, for a standard-sized remittance, the average cost faced by a savvy consumer has halved over less than a decade to less than 3% (World Bank 2024, Figure 3). And there is strong evidence that further gains are coming. Indeed, for a range of recipient countries, Figure 3 shows how much less than the average cost (black bars) the cheapest provider (red bars) charges. The message is that as consumers gain familiarity with what is available, the benefits of competition among traditional providers are likely to intensify, further lowering average costs.

Third, while both governments and private groups are expanding their efforts to track illicit crypto payments, the reputational damage from criminal activity lingers. In addition, spectacular failures in the past – such as the collapse of the FTX exchange (Cecchetti and Schoenholtz 2022) – encourage consumer doubts about the reliability of crypto custodians. Similarly, dire headlines about crypto-related kidnapping and torture probably deter potential crypto users who do not trust custodians and instead would consider owning a digital wallet (Horvath 2025).

So what is taking off? The answer seems to be “payments stablecoins.” The key difference is that the value of a cryptocurrency like Bitcoin isn’t tied to anything else: indeed, some of those who buy Bitcoin are hoping for its price to rise. In contrast, the value of a stablecoin is based on the ownership of an underlying asset, like US Treasury bonds or a mutual fund that invests in high-quality bonds. Thus, the value of stablecoins is neither going to rise or fall by much–which makes them useful for transactions. Cecchetyi and Schoenholtz write:

‘[P]ayments stablecoins’ … are reserve-backed tokens with value pegged to government-issued currency, predominantly the US dollar. Smart contracts on the Ethereum blockchain control the two largest stablecoins, Tether’s USDT and Circle’s USDC. These originated as a stable-valued means of payment for people trading inside the crypto world. They quickly turned into the primary bridge between the traditional financial system and the crypto world, allowing investors and speculators to shift funds between traditional financial instruments (equity, bonds, bank balances, and the like) and crypto assets (Bitcoin, Ether, Solana, etc.). At this writing, this remains stablecoins’ primary use.

Ironically, stablecoin issuers (and some other promoters of crypto) are now strong advocates of government regulation. Their goal is to legitimise crypto in ways that can draw participants from the traditional financial system. Put slightly differently, the dream of a fully decentralised system operating without intermediaries or governments has given way to a far less radical vision that requires government oversight and the legal enforcement of property rights.

Thus, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, for obvious reasons usually called the GENIUS Act, was signed into law by President Trump in June. It creates a short list of safe assets in which stablecoins are allowed to invest. It requires that stablecoins do not pay interest, although they can offer “rewards” to holders of stablecoins that look at lot like interest. It requires that stablecoins comply with rules like know your customer (KYC), anti-money laundering (AML) and anti-terrorist financing (ATF) standards–which is to say that they aren’t very anonymous.

But again, stablecoins are basically a halfway house for investors to move money between cryptocurrencies like Bitcoin and more conventional financial assets. They aren’t going to rise and fall in value, and they aren’t a useful method for carrying out other everyday transactions, either. So their ultimate usefulness seems limited.

Thus, Cecchetti and Schoenholtz point to the new kid on the block for financial technology: “tokenised deposits and tokenised money market funds.” In particular, they discuss “JPMorganChase’s tokenised deposit (JPMD) and BlackRock’s tokenised money market fund (BUIDL).” The first is still experimental; the second has just started. The idea here is that these products will not just be available to those with accounts at JPMorganChase and BlackRock, but any institutional (or approved) customer will be able to use these products to make deposits/withdrawals within the financial ecosystem of these giant firms.

Outside of China, JPMorganChase is the largest global bank (with assets of roughly $4 trillion) and BlackRock is the largest global asset manager (with assets under management of more than $12 trillion). When these gigantic institutions offer customers a product, they do it inside an ecosystem with tens of millions of existing customers and a wide array of complementary products and services. In this context, as the number of customers using JPMD or BUIDL increases, the internal (‘on us’) market will grow more liquid, with the potential for instant settlement both within and across borders at minimal cost. …

These tokenised assets differ from existing deposit accounts and money market funds in two important ways. First, they clear and settle around the clock. And second, the plan is that they will allow for programmable settlement and automated functions through smart contracts. They also can trade either on a proprietary centralised ledger or, using smart programming to provide access only to approved clients, on a public, distributed ledger. … Imagine, for example, that a few internationally active systemic banks decide to accept each other’s tokenised deposits instantly at par. In effect, they would be implementing a digital version of the 19th century US cheque clearinghouses that assured the expeditious settlement of most payments, imposed credit standards, and even acted as private lenders of last resort (Bernanke 2011). Such a 21st century clearinghouse would be a too-big-too-fail juggernaut.

In short, the financial technology revolution has come a long way since the Bitcoin enthusiasts of 10-15 years ago imagined circumventing national currencies and government regulations. The next iteration may be that a central method of settling everyday payments starts to happen with “tokenized” deposits and money market accounts run by financial megacorporations.

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