The Color of Money

The fungibility of money is a concept we impose on physical currency to remove friction from trade, and to facilitate the evaluation of liabilities and assets. Classical double-entry accounting practices treat money as fungible because it is concerned with describing the financial position of a business, rather than being an assets inventory system. Classical accounting wants to answer questions like: Are there sufficient assets to back the liabilities? Did the gains balance the losses, and if not to what degree were they unbalanced? Answering these questions requires an assumption that money—the measure of value—is all the same, that it is totally fungible.

But as financial institutions are increasingly concerned with the source and location of funds, we want to answer increasingly sophisticated questions, like: In which bank accounts is this customer’s money being stored? In which transactions were those funds involved? Are some of our treasury holdings more risky than others, and if so, which ones? The assumption of fungibility makes answering these questions impossible.

Enter the color of money, a ledgering concept Clément Salaün introduces in his Fintech_Devcon 2025 talk that allows us to answer these kinds of sophisticated questions. Watch the entire talk below.