Central bank digital currencies (CBDCs) and stablecoins are both digital assets designed to facilitate electronic payments, but they differ significantly in origin, governance and risk.
This article outlines the key differences, explores the motivations behind each, and explains why the debate matters to the future of global finance.
A CBDC is a digital version of a national currency issued and regulated by a central bank. In contrast, a stablecoin is typically issued by a private company and pegged to the value of a fiat currency, commodity or algorithmic mechanism to maintain price stability.
While both aim to provide faster, more efficient payment systems, CBDCs are public money – liabilities of the central bank – whereas stablecoins are considered private money and depend on the solvency and credibility of the issuer.
Stablecoins emerged alongside the growth of cryptocurrency markets. Tether (USDT) was the first widely used stablecoin, launched in 2014, followed by USD Coin (USDC) in 2018 by Circle and Coinbase. These tokens quickly became essential for trading crypto without exposure to high volatility.
CBDCs, meanwhile, are a response from central banks to this shift in the digital monetary landscape. The People’s Bank of China (PBoC) began testing its digital yuan in 2020, becoming the world’s most advanced large-scale CBDC trial. The Bank of England, European Central Bank (ECB) and Federal Reserve have since accelerated their own research.
Public commentary and global policy moves
Officials around the world have expressed concern about stablecoins and growing interest in CBDCs, although approaches vary significantly.
In July 2021, Federal Reserve Chair Jerome Powell told Congress:
“That, in particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency.”
The remark highlighted the view among central banks that CBDCs could reduce reliance on private digital currencies by providing a trusted, state-backed alternative.
Similarly, ECB President Christine Lagarde has emphasised the need for regulation. In a 2021 TIME 100 Talk, she stated:
“Stable coins are pretending to be a coin but in fact, it’s completely associated with an actual currency … those coin issuers should have to back up their coins with as many dollars as they have coins. That needs to be checked, supervised, and regulated.”
In the UK, the Treasury and Bank of England have moved forward with plans for a digital pound. The FCA is also preparing guidance for regulating stablecoins used in payment systems, due in 2025.
How they differ in structure and use
| Feature | CBDCs | Stablecoins |
| Issuer | Central banks | Private companies or protocols |
| Backing | Fiat currency (directly) | Fiat, crypto, or algorithmic models |
| Regulation | Central bank-supervised | Varies widely; evolving regulations |
| Use cases | Public payments, financial inclusion, cross-border | Trading, remittances, DeFi, B2B payments |
| Monetary control | Integrated with monetary policy | Outside direct central bank control |
CBDCs are typically designed for domestic retail payments or wholesale interbank settlements. Stablecoins, meanwhile, thrive in decentralised applications and cross-border commerce due to their programmability and platform flexibility.
Why this matters to the future of money
The debate between CBDCs and stablecoins isn’t just technical – it’s fundamentally about who controls the future of money. Central banks are concerned about systemic risk, monetary sovereignty, and financial stability if stablecoins grow unchecked.
Stablecoin advocates argue they promote innovation and financial efficiency, especially in regions where banking access is limited. The risk, critics say, is that poorly regulated issuers could undermine trust or enable capital flight.
The International Monetary Fund (IMF) warned in its April 2023 Global Financial Stability Report that stablecoins used for cross-border flows “could pose risks to monetary policy transmission and financial stability in smaller economies.”
What’s next for CBDCs and stablecoins?
- Over 130 countries are exploring or piloting CBDCs, according to the Atlantic Council’s CBDC Tracker.
- The digital euro and digital pound are in advanced consultation phases, with pilots expected in 2026.
- In the US, the digital dollar remains in the research stage, with Fed officials emphasising caution.
Stablecoins like USDC, USDT, and PYUSD are gaining traction for business payments, particularly in Latin America, Southeast Asia and Africa.
