The European Central Bank has published Working Paper No. 3022 reviewing the terminology used in digital money, decentralised finance and related payment technologies, arguing that common labels are often biased, confusing or applied inconsistently. The paper (authored by Ulrich Bindseil, Charles-Enguerrand Coste and George Pantelopoulos) compiles “authoritative” current definitions, traces the origins and evolution of key terms, and assesses their quality against principles drawn from ISO terminology standards. It proposes a set of vocabulary changes aimed at separating economic substance from the ledger technology used. For example, it argues that traditional assets represented on a distributed ledger should not be called “crypto-assets” and should instead be described as the underlying instrument held or represented on a DLT platform, while unbacked, DeFi-native entries could be labelled “virtual assets” or “virtual ledger entries”. It recommends avoiding terms such as “smart contracts” (presented as neither “smart” nor a contract) and treats “stablecoin” as potentially misleading and redundant where the instrument is effectively e-money represented on a DLT platform, particularly given the failure of algorithmic constructs marketed as stable. It also critiques “tokenisation” as misleading, suggesting it overstates the uniqueness of DLT by implying bearer-like “tokens”, and recommends reframing it as the act of representing ownership on a ledger irrespective of whether the ledger is distributed or central. For central bank money, it suggests replacing “digital” with “electronic” and “currency” with “money” in retail CBDC terminology, and discontinuing the technological use of “wholesale CBDC” in favour of “wholesale central bank money represented on a DLT platform”.
European Central Bank 2025-02-11
European Central Bank working paper reviews digital money terminology and proposes clearer labels for DeFi and CBDC
The European Central Bank's Working Paper No. 3022 critiques digital money and decentralised finance terminology, highlighting biases and inconsistencies. It proposes vocabulary changes to better reflect economic substance, such as distinguishing "crypto-assets" from traditional assets on distributed ledgers, and suggests reframing terms like "smart contracts" and "stablecoin." The paper also recommends using "electronic money" instead of "digital currency" for retail CBDC and revising "wholesale CBDC" terminology.