CBDCs vs Stablecoins — Which Will Prevail? Introduction (Pt. 1)

Central Bank Digital Currencies (CBDCs) and stablecoins have emerged as two leading contenders in the race to shape the future of digital money. 

Both promise the benefits of fast, low-cost, and secure transactions. Both are often discussed in the context of modernizing payments and extending financial inclusion. 

Yet CBDCs and stablecoins are fundamentally different in their design and governance – one is issued by a nation’s central bank, while the other is typically a private cryptocurrency pegged to fiat value. 

This blog post will break down what each represents, how they overlap and differ, and what challenges and opportunities they bring. 

Throughout this series of articles, we’ll explore why CBDCs spark concerns about privacy and control, how stablecoins are already fulfilling many of the functions CBDCs aim to provide, and examine recent trends (including our own data) showing the rise of stablecoins in payments. 

By the end, you’ll have a clearer view of the CBDC vs stablecoin debate – and insight into which might ultimately prevail in the digital economy.

What is a CBDC?

A Central Bank Digital Currency (CBDC) is essentially a digital form of a country’s sovereign currency, issued and backed by the central bank. 

In other words, it’s “electronic fiat” with the full faith and credit of the government behind it. Instead of circulating as physical notes or coins, a CBDC would exist as a digitized unit (or account balance) guaranteed by the central bank. 

Because it is an official legal tender, one CBDC unit is always equivalent in value to its cash counterpart (e.g., 1 digital euro = 1 euro coin).

CBDCs come in different models. A retail CBDC is intended for use by the general public for everyday payments, much like cash or bank deposits, whereas a wholesale CBDC is limited to financial institutions for interbank settlements. 

Most discussions focus on retail CBDCs, since these would directly impact consumers and businesses. Importantly, a CBDC is not just a digital version of the money you hold in your bank account – it is a direct liability of the central bank (a digital claim on the state’s currency), rather than a claim on a private bank. This means holding money in CBDC form is like holding cash with the central bank itself.

Why are central banks interested? There are many motivations driving the exploration of CBDCs. These include promoting financial inclusion (giving unbanked populations access to digital money), improving payment system efficiency (faster, cheaper transactions, especially cross-border), and ensuring the central bank’s money remains relevant in an era of cryptocurrencies and fintech. 

Some central banks also see CBDCs as a way to create “programmable money” (allowing certain features or rules embedded in the currency) and to increase the transparency of money flows in the economy. In short, central banks don’t want to “let the future of money pass them by”, especially as cash usage declines and private digital currencies proliferate.

The Global State of CBDCs 

As of early 2025, over 130 countries are at some stage of researching or developing CBDCs, representing 98% of global GDP. 

Dozens of central banks have moved into advanced pilots or development phases, including major economies like China (with its digital yuan pilot), India, Brazil, and the Eurozone A few countries have fully launched a CBDC for public use – for example, the Bahamas’ Sand Dollar, Jamaica’s JAM-DEX, and Nigeria’s eNaira. However, adoption has been mixed. 

Nigeria’s eNaira, for instance, has seen very slow uptake (with less than 1% of Nigeria’s currency in circulation represented by eNaira as of early 2024). Meanwhile, China’s digital yuan (e-CNY) pilot has processed impressive volumes (nearly ¥7 trillion, about $1 trillion USD, in transactions by mid-2024), though it is still limited to certain regions and user groups.

It’s important to note that no major Western economy has fully launched a retail CBDC yet. In the United States, the Federal Reserve and lawmakers have taken a cautious stance – in fact, by 2025 there is open opposition to issuing a U.S. digital dollar without clear authorization. 

Top U.S. officials (across the White House, Congress, and the Fed) have signaled no plans for a retail CBDC in the near future, citing concerns over its necessity and potential risks. 

Federal Reserve Chair Jerome Powell even testified that he would not pursue a digital dollar during his term ending in 2026. Instead, U.S. attention has partly shifted to the regulation of private digital dollars (stablecoins), a point we’ll revisit. 

In contrast, Europe is moving steadily toward a digital euro, although not without debate – the European Central Bank (ECB) began a “preparation phase” in late 2023 to develop rules and prototypes for a digital euro, even as formal approval from European lawmakers is pending. 

We will dive more into the EU’s plans later on. First, let’s define stablecoins and see how they compare to CBDCs.

What is Stablecoin?

A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to an external reference, usually a traditional fiat currency like the U.S. dollar or euro. 

In practice, 1 unit of a fiat-backed stablecoin is meant to be equal in value to $1 (or ¥1, €1, etc.), providing the price stability that regular cryptocurrencies like Bitcoin lack. 

Stablecoins achieve this peg by backing each token with reserves of assets. For example, a company issuing a USD stablecoin will hold an equivalent amount in dollars or dollar-denominated assets (cash, treasury bills, etc.) in reserve for every stablecoin issued, ensuring redeemability at par.

Most popular stablecoins today are issued by private entities. Fiat-collateralized stablecoins (like Tether’s USDT or Circle’s USDC) are backed by cash or cash equivalents. Some stablecoins use other mechanisms – crypto-collateralized stablecoins (like DAI) are backed by other cryptocurrencies, and algorithmic stablecoins attempt to hold a peg through automatic supply adjustments (though this design proved fragile in cases like the failed UST stablecoin). 

Feel free to learn more about stablecoins and their types in our other article.

The key idea is that unlike typical volatile crypto assets, stablecoins aim to offer the reliability of fiat combined with the technical advantages of crypto (such as fast, borderless transfers and operation on decentralized networks).

Stablecoins have become integral to the cryptocurrency ecosystem. They serve as a “digital cash” on crypto exchanges and DeFi platforms – a stable store of value to park funds in between trades, or to use as collateral. 

Beyond the trading world, stablecoins are increasingly used for payments and remittances, since a stablecoin can be sent across the world in minutes, 24/7, often at lower fees than bank wires or remittance services. 

For users in countries with high inflation or strict capital controls, USD-pegged stablecoins offer an accessible way to hold dollar value without a bank account. All that is needed is a crypto wallet. 

In Nigeria, for instance, many individuals turned to dollar stablecoins like USDT to protect their savings amid naira volatility and high inflation, given the limited success of the government’s eNaira CBDC.

Technically, most stablecoins operate on existing public blockchains. Ethereum is a common network (where USDT, USDC, DAI and others exist as ERC-20 tokens), but stablecoins also live on networks like Tron, Solana, BSC, and others. This means transactions are recorded on a distributed ledger, and users can hold stablecoins in standard crypto wallets. 

Unlike a CBDC, which would be a central bank-run system, stablecoin transactions piggyback on these independent blockchain networks. However, centralization can come in at the issuer level: for example, the company behind a stablecoin can typically freeze or blacklist specific tokens (to comply with law enforcement requests), which is an important point of control we will discuss.

To sum up, stablecoins are privately issued digital tokens pegged to fiat. They bring the familiarity of fiat currency value into the crypto realm. 

Next, let’s compare stablecoins side-by-side with CBDCs to highlight their similarities and key differences.

Similarities Between CBDCs and Stablecoins

On the surface, CBDCs and fiat-backed stablecoins share a number of similarities in concept and intended use cases:

Digital Form of Fiat Value

Both represent an amount of fiat currency in digital form. A CBDC is literally the digital version of sovereign money, and a dollar-pegged stablecoin is effectively a digital proxy for a dollar. 

In everyday use, 10 digital dollars from a CBDC or 10 USDC stablecoins could both be used to pay for a $10 item (assuming merchants accept them). The goal of both is to maintain a stable value equivalent to traditional money.

Fast, Electronic Payments

Both enable fast transactions using digital networks. Unlike cash, they can be sent online instantly (retail CBDC transactions could be near-instant through the central bank’s infrastructure; stablecoin transactions are typically confirmed within seconds or minutes on a blockchain). 

This makes them well-suited for e-commerce, P2P transfers, and cross-border payments without the delays of bank wires. They effectively operate 24/7, unconstrained by banking hours.

Lower Cost and Financial Inclusion

Both CBDCs and stablecoins hold the promise of cheaper payment transfers. By reducing intermediaries, they aim to cut transaction fees and friction. 

This is touted as a boon for financial inclusion – for example, migrant workers could send money abroad more cheaply, and unbanked people could transact digitally if they have a mobile phone. 

In practice today, stablecoins are already being used for remittances and as a banking alternative in some regions, which is exactly one of the motivations central banks cite for CBDCs.

Programmability

Both are compatible with the idea of “programmable money.” CBDCs could be designed with smart contract capabilities or policy-driven rules (like funds that expire if not spent by a date, or automatic tax collection). 

Stablecoins, being tokens on programmable blockchains, can already be integrated into smart contracts – they are heavily used in decentralized finance protocols. In other words, both open the door to new financial innovation where money itself can have logic attached.

Trust in a Pegged Value

Users of either type of digital money rely on trust that 1 unit will reliably equal 1 unit of fiat. 

In a CBDC, that trust comes from the central bank’s guarantee. In a stablecoin, trust comes from the issuer’s reputation and transparency of reserves. But the user experience goal is similar: price stability and 1:1 redeemability with fiat.

Because of these similarities, it’s easy to see why CBDCs and stablecoins are often compared. They both fill the niche of “digitized cash” in different ways. 

However, the differences in who issues them and how they operate under the hood lead to very different implications. 

The next section breaks down the key differences point by point.

Key Differences Between CBDCs and Stablecoins

Despite surface similarities, CBDCs and stablecoins diverge on critical dimensions. The table below summarizes some of the most important differences:

Aspect	CBDCs (Central Bank Digital Currencies)	Stablecoins (Privately Issued Digital Coins)
Issuer & Backing	Central bank of a country; directly backed by sovereign fiat. The central bank guarantees the value.	Private company or decentralized project; pegged to fiat but backed by reserves or collateral managed by the issuer. Trust depends on the issuer’s transparency and reserve quality.
Legal Status	Legal tender by definition. A CBDC is an official currency, a direct claim on the central bank.	Not legal tender (no country mandates acceptance). However, it is widely accepted by crypto users and increasingly by businesses. Regulators classify them as crypto-assets or e-money and are crafting legal frameworks (e.g., EU’s MiCA).
Control & Governance	Centralized control: the central bank (often with government oversight) controls supply and ledger. They can potentially program rules into the currency. Distribution might be intermediated by banks, but the central bank has ultimate control.	Privately managed: control rests with the issuer (or a governance protocol). Issuers can typically freeze or blacklist tokens (to comply with regulations), but day-to-day transactions occur on decentralized networks without central approval. No single government directly controls a stablecoin’s usage globally (though they can regulate the issuer).
Transparency & Privacy	Depends on design: transactions could be recorded on a central ledger or permissioned blockchain. Privacy is a top concern – without safeguards, a CBDC could let authorities see all transactions, so central banks are exploring privacy features. Still, it’s generally not as anonymous as cash, and users must trust the central bank’s promises on privacy.	Public blockchain transactions are pseudonymous: wallet addresses are visible, but not the identity behind them (unless linked via KYC). This offers a degree of privacy from other users, but transactions are transparent on the ledger. Importantly, stablecoin issuers can often monitor and freeze addresses in extreme cases (e.g., tied to crime), meaning stablecoins are not fully censorship-resistant. Overall, they provide privacy similar to other crypto — not tied to one’s identity by default, but not truly anonymous either.
Technology Infrastructure	Varies by project: some CBDCs use distributed ledger technology (DLT), but often permissioned (only selected nodes like banks can validate). Others might use a centralized database. The tech is purpose-built for the currency.	Runs on existing public blockchains (Ethereum, Tron, etc.). This means they leverage established, globally accessible networks and standards. However, it also means reliance on those networks’ performance and fees (e.g., Ethereum gas costs). Some stablecoins are on multiple chains to mitigate this.
Monetary Policy Impact	Part of the official money supply (M0 or M1). Could give central banks new direct tools (like setting interest on CBDC holdings). However, widespread use could potentially disrupt banks (if people hold CBDC instead of bank deposits) and affect credit creation. Central banks plan to manage this (e.g., holding limits) to avoid destabilizing the banking system.	Not directly part of any country’s money supply (they are liabilities of the issuer, not the central bank). However, large-scale use of a stablecoin (e.g., a USD stablecoin) effectively extends the usage of that fiat currency into new realms. Stablecoin issuers don’t set monetary policy; they mainly manage reserves to maintain the peg. Regulators worry that if a stablecoin collapsed or lost its peg, it could hurt users and markets – hence calls for robust reserve rules.
Examples	China’s e-CNY (pilot), Nigeria’s eNaira, the upcoming digital euro (in development), Eastern Caribbean DCash. These are issued by central banks with varying designs (some account-based, some token-based).	USDT (Tether) – USD-pegged, largest by volume; USDC (Circle) – USD-pegged, known for transparency; DAI – crypto-collateralized decentralized USD-pegged coin; EURt or EUROC – stablecoins pegged to euro. Thousands of merchants and crypto platforms accept major stablecoins as payment or settlement.

The issuer and governance difference is the most fundamental: CBDCs are sovereign money with public-sector control, whereas stablecoins are a private innovation riding on cryptocurrency infrastructure. This leads to divergent concerns and advantages for each, which we’ll explore next.

So Which Digital Currency Will Shape the Future?

So, which will prevail – Stablecoins or CBDCs? Unfortunately, answering this question requires digging deeper. 

Many questions remain unanswered that could help us understand which is more likely to become the standard in the future. How strong is the pushback against CBDCs? Could stablecoins face eventual regulatory bans? What are the detailed future plans for both stablecoins and CBDCs?

Stay tuned as we explore these topics further in part two and three of this article. Follow us on X or LinkedIn to make sure you notice when we release our next article.