Commercial bank money consists primarily of deposit liabilities issued by commercial banks and used by households and businesses to make payments and hold monetary balances.
A bank-account balance is a claim on the commercial bank. Payments between customers of different banks require corresponding adjustments between the banks, with settlement commonly taking place in central bank money. Prudential regulation, supervision, access to central bank settlement, and deposit insurance where applicable help support confidence and par exchange between bank deposits. Tokenized deposits seek to represent the same type of bank liability on programmable infrastructure.
Commercial bank deposits are liabilities of private banks. Central bank money is a liability of the central bank and serves as the ultimate settlement asset in the conventional two-tier monetary system.
Most money used in modern economies takes the form of commercial bank deposits, making their convertibility at par and settlement infrastructure central to the functioning of the monetary system.
A household checking-account balance is commercial bank money because the household holds a deposit claim on its bank. The central bank is not the obligor on that deposit.