Money is becoming increasingly digital. Around the world, consumers are paying with smartphones, businesses are settling transactions online, and governments are exploring new forms of sovereign digital currency. At the same time, private companies have introduced digital assets that promise faster and cheaper payments across borders. These developments have sparked renewed debate over what money is and who should issue it.

What is digital money?

Digital money refers to money that exists primarily in electronic form and can be stored, transferred, and exchanged through digital networks. Ownership is recorded electronically, allowing transactions to occur mostly instantaneously across computers and mobile devices.

Digital money can be distinguished from the electronic payments people already use every day. When someone pays with a debit card or transfers money through online banking, the payment is digital, but the money itself is a commercial bank deposit. Digital money refers to forms of money that are designed to exist digitally, rather than simply representing a physical counterpart.

Broadly, digital money can be grouped into three categories:

Cryptocurrencies

Cryptocurrencies are digital assets that use distributed ledger technology to enable peer-to-peer transactions without relying on traditional financial intermediaries. They can vary considerably in their design and intended use. While digital currencies such as Bitcoin and Ethereum derive their value from market demand and are therefore highly volatile, stablecoins are a class of cryptocurrencies that work differently by aiming to provide stability of value while retaining the speed and programmability of digital assets. They are generally issued by private companies, and their value is pegged to an underlying asset, usually a national currency such as the US dollar or highly liquid government securities.

Tether’s USDT and Circle’s USDC together account for some 85% of the global stablecoin market capitalization. While stablecoins account for a relatively small share of cryptocurrency market capitalization, they exceed non-stablecoin cryptocurrencies in cross-border transaction flows (Figure 1). Stablecoin issuance now exceeds US$300 billion in value, with approximately 97% of stablecoins denominated in US dollars. Its use is projected to grow rapidly compared to other payment systems, reaching 5% to 10% of cross-border payments by 2030 or between US$2.1 trillion and US$4.2 trillion according to a Brookings study published in March 2026.

Figure 1: Bitcoin and Ethereum versus stablecoins

Source: International Monetary Fund

Note: BTC is bitcoin. ETH is Ethereum. USDT is Tether and USDC is the USD Coin offered by Circle. Reuter and CA are two separate measurement methods of stablecoin volumes.

Stablecoin adoption is particularly pronounced in the Asia-Pacific region and North America, though usage is also growing rapidly in Africa and Latin America. In many of the latter economies, users adopt dollar-pegged stablecoins as a hedge against inflation and exchange-rate volatility.
Central bank digital currencies (CBDCs)

These are digital versions of sovereign currency issued directly by a country's central bank. Like physical cash, a unit of CBDC represents a direct claim on the central bank and therefore carries minimal credit risk. Depending on their design, CBDCs can be used by financial institutions, households, or businesses, with the first referred to as wholesale CBDCs and the latter two are referred to as retail CBDCs.

Countries and major currency areas like the European Union (EU) are pursuing public sector digital-money strategies. Most countries have either launched or are piloting, developing, or researching central bank digital currencies (CBDCs) (Figure 2). These projects are currently at an early stage.

Figure 2: Countries in the process of pursuing CBDCs

Source: Atlantic Council
Tokenized bank deposits

Tokenized bank deposits are digital representations of commercial bank deposits issued on a blockchain or other distributed ledger technology (DLT). Each token is fully backed by fiat deposits held at a licensed bank, meaning they retain the stability and regulatory protections of traditional bank money while gaining the programmability of blockchain-based assets.

Unlike stablecoins, which are typically issued by non-bank entities, and CBDCs, which are issued by central banks, tokenized deposits are issued by regulated commercial banks and remain subject to existing banking regulations. Their primary advantage is that they enable faster, programmable, and potentially round-the-clock transactions, making them particularly valuable for applications such as cross-border payments and automated conditional payments through smart contracts.

Why countries care about digital money

Payment efficiency: Domestic payment systems have become faster, but cross-border payments remain slow and expensive. Digital money could reduce settlement times and transaction costs, lowering the cost of international trade and investment. This could particularly benefit small and medium-sized enterprises (SMEs) and firms in emerging markets.
Monetary sovereignty: Money is a public institution that allows governments to conduct monetary policy and maintain financial stability. Governments want to preserve the role of sovereign money as privately issued digital currencies expand. Digital money can help governments retain influence over domestic payment systems and financial stability.
Financial resilience: Payment systems have become concentrated among card networks and technology firms usually based in a small number of countries, creating operational and geopolitical vulnerabilities. Alternative digital payment systems using digital money can diversify payment infrastructure and help reduce dependence on foreign providers, while strengthening resilience to disruption and cyber threats.
Economic competitiveness: Digital money can promote innovation in financial technology, attract investment, and give countries greater influence over international standards in financial technology. Widely adopted payment systems can create lasting advantages and strengthen a country's integration into global trade and investment networks.

Against this backdrop, the US, China, and the EU have each adopted distinct approaches that reflect their broader economic and political priorities.

The United States

The US government's role has focused on regulating rather than issuing digital money. So far, regulations aim to ensure that private issuers maintain adequate reserves and protect consumers while issuing digital money. Building on the prevalence of dollar-backed stablecoins, the country enacted the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which reinforces the international role of dollar-denominated stablecoins by creating a regulatory framework and requiring issuers to maintain 1:1 reserves backed by US Treasuries and other safe, liquid assets.

The Act also extends US regulatory influence beyond its borders. Domestic issuers are subject to anti-money laundering and sanctions compliance requirements under the Bank Secrecy Act, while foreign issuers seeking access to the US market must register with US regulators unless they operate under a regulatory regime deemed comparable to the US framework.

This approach may export US regulatory standards by incentivizing foreign jurisdictions to align with one of the world's largest stablecoin markets, thereby establishing US standards as a de facto global benchmark.

The approach may contribute to a more fragmented stablecoin ecosystem. Some of the largest dollar stablecoin issuers, including Tether (incorporated in El Salvador), operate primarily offshore and outside direct US federal regulation, though they face rising US compliance regulations. Under the GENIUS Act, Tether could potentially gain access to the US market if El Salvador were found to have a comparable regulatory regime under Section 18 or if Tether otherwise became compliant. The result is that US supervisory influence expands over the regulated segment while a significant share of globally circulating dollar stablecoins continues to operate under various other regulatory regimes. Over time, this could reduce interoperability across jurisdictions.

Issuing a CBDC is currently under an executive ban as the Trump administration favors private-sector digital assets, particularly dollar-backed stablecoins, as the way to preserve the dollar's role in digital finance. However, the US is active in the CBDC research space. The Federal Reserve Bank of New York is participating, alongside eight other central banks and more than 40 financial institutions, in Project Agorá, an initiative to modernize the correspondent banking system on which international dollar settlement depends.

China

China has adopted almost the opposite approach to that of the US by developing the digital yuan, or e-CNY, as a sovereign digital currency issued by the People's Bank of China.

The e-CNY is designed as a digital form of public money distributed through commercial banks but ultimately backed by the central bank. Unlike privately issued stablecoins, issuance and governance remain under state control. The digital yuan aims to modernize domestic payments and improve financial inclusion.

China has also explored the use of digital currencies for cross-border payments through initiatives such as Project mBridge, which involves linking multiple central bank digital currencies that can facilitate international settlements. Although widespread international adoption remains limited, China has become one of the world's leaders in large-scale experiments in sovereign digital currency.

It is possible that Hong Kong's stablecoin regime may provide China with a parallel regulated framework for the issuance of fiat-referenced stablecoins, including those denominated in offshore renminbi. If such products achieve meaningful cross-border adoption, they could complement the e-CNY by extending the international use of the renminbi through market-based digital payment networks. This would represent a different pathway to digital currency internationalization from a purely CBDC model.

The European Union

The EU is regulating the stablecoin market to anchor it within the existing financial system while simultaneously developing a digital euro, supporting both regulated private digital money and a CBDC.

The Markets in Crypto-Assets (MiCA) Regulation establishes a harmonized framework governing crypto-assets and stablecoins across the EU. This establishes a pathway to develop digital money within the existing financial systems where tokenized deposits and stablecoins are issued by banks. It introduces licensing requirements, reserve standards, disclosure obligations, and consumer protections intended to support innovation while preserving financial stability.

Alongside MiCA, the European Central Bank continues to develop a digital euro. The objective is to ensure that citizens retain access to central bank money even as payments become digital, while complementing cash and commercial bank deposits.

The European approach also reflects concerns about strategic autonomy. The European Central Bank has explicitly positioned the digital euro partly as a response to the growing role of private dollar-denominated stablecoins and the associated challenge to European monetary sovereignty. Digital money forms part of a broader strategy to enhance financial system resilience and monetary stability.

Conclusion

The US, China, and the EU are pursuing different models of digital money, but the future of the financial system and the role of digital money within it will depend on which system(s) achieve meaningful scale and cross-border use. Some key signals to watch are whether dollar-backed stablecoins become a major channel for international payments, whether the e-CNY or renminbi-backed stablecoins gain traction beyond China, whether the digital euro reduces Europe’s dependence on foreign payment networks, or whether major banks and payment networks begin integrating these forms of digital money into mainstream financial infrastructure. The interoperability of these systems will also matter because if competing forms of digital money remain fragmented across regulatory and technical boundaries, their ability to reshape the global financial system will be limited.