CBDC vs. Stablecoins: Policy Considerations for the Digital Economy

Ongoing study. Available March 2025. Contact us if you'd like access.

In the evolving landscape of digital finance, policymakers face a critical choice: Central Bank Digital Currencies (CBDCs) or privately issued stablecoins? This research dissects the fundamental trade-offs between the two models, offering a structured analysis of their implications for financial stability, innovation and national sovereignty.

Key Themes Explored

• Defining the Ideal: What conditions create the most effective CBDC or stablecoin? We explore core design considerations-security, privacy, accessibility, monetary policy control and technological robustness.
• Which Serves Countries Better? We first ask a fundamental question: Are CBDCs or stablecoins truly necessary? From financial inclusion to cross-border transactions, we evaluate whether existing financial systems suffice or if digital alternatives offer unique advantages. We then explore real-world use cases where CBDCs may outperform stablecoins-and vice versa. For instance, could a domestic digital token for international tourists boost tourism?
• Should Policymakers Take an Active Role? Beyond mere adoption, should governments build their own digital currencies, regulate private stablecoins, or incentivize specific models? What factors should influence this decision?
• Coexistence or Competition? Can private stablecoins and state-backed digital currencies thrive side by side? We explore hybrid models, such as the U.S., which appears to be moving away from a CBDC while allowing state-level initiatives like Wyoming's USDW-a government-issued, fully reserved stablecoin. What does this signal for the broader financial ecosystem and could it serve as a model for other nations?
• Global Interoperability and Governance: When private issuers like Circle engage in monetary discussions with governments such as Singapore’s, how should standards, compliance and cross-border coordination be structured? What lessons can be drawn for global monetary networks?
• Beyond the Currency Layer: Stablecoins are just the beginning. This research emphasizes the need for policymakers to look at broader financial infrastructure-liquidity pools, interoperability protocols and programmable financial systems-that will shape the next era of digital finance.

This report challenges the conventional “either-or” debate, advocating for a more nuanced understanding of digital financial ecosystems. Policymakers in the stablecoin era face a critical dilemma: intervene too little and sovereignty may erode; intervene too much and innovation could be stifled. Striking the right balance is essential. As central banks and private innovators shape the future, the fundamental question remains: What role should government play in fostering an open, resilient and secure digital economy?