The debate between stablecoins and central bank digital currencies (CBDCs) has been ongoing, with some governments and central banks viewing stablecoins as a threat to their control over the money supply. However, this dichotomy overlooks the common DNA of both stablecoins and CBDCs: programmable integrity. In reality, stablecoins and CBDCs solve different problems and serve different purposes. Stablecoins are characterized by open, global liquidity, while CBDCs are suitable for sovereign, privacy-sensitive public payments.
Understanding the Role of Stablecoins and CBDCs
Stablecoins have a market capitalization of almost $316 billion and generated $46 trillion in total transaction volume last year. This demonstrates their utility and popularity in the market. On the other hand, CBDCs are being developed and implemented by governments and central banks to provide a digital alternative to traditional fiat currency. According to a report by the Atlantic Council, three countries have an active CBDC, 49 countries are in the pilot phase, 20 countries are currently developing the technology, and 36 countries are researching it.
The real prize is programmable money, which enables the traceable, conditional, and efficient distribution of welfare, pensions, subsidies, and emergency aid. Both stablecoins and CBDCs run on blockchains, which provide an immutable ledger for transactions, ensuring auditability and accountability. This technology can help governments deliver services to their citizens more efficiently, while also maintaining national sovereignty and promoting global coordination.
Programmable Money and Digital Sovereignty
Certain government transactions require privacy and anonymity, such as confidential citizen support programs and aid distribution. CBDCs are crucial for these types of transactions. On the other hand, stablecoins can help distribute subsidies and social benefits. Blockchains can help issue and distribute government assets efficiently according to predefined requirements, making them ideal for programmable money.
By leveraging blockchain technology, governments can offer both stablecoin and CBDC-based services to their citizens. This can help maintain currency control, reduce friction in businesses and trade, and provide instant access to digital financial services. It is time to end the either/or approach to stablecoins and CBDCs and embrace both, recognizing their respective strengths and weaknesses.
As Xin Yan, co-founder and CEO of Sign, a global digital infrastructure company, notes, “Governments often must balance national interests while keeping cross-border transactions open to international cooperation. Stablecoins and CBDCs can help citizens gain instant access to digital financial services and reduce friction in businesses, trade, and relief programs.” Sign’s systems have helped governments and regulated institutions deliver secure, large-scale digital transformation, reaching more than 50 million people in production.
Xin Yan is co-founder and CEO of Sign, a global digital infrastructure company with five years of manufacturing experience and a valuation of $1.3 billion.
For more information on the harmonization of stablecoins and CBDCs, visit https://crypto.news/nations-must-harmonize-stablecoins-and-cbdcs-opinion/
