The crypto system is no longer a sideshow. Dollar stablecoins now put dollar claims into circulation well beyond the regulated US banking perimeter, and cryptoisation is beginning to transform the international monetary and financial system. This column argues that the changes crypto sets in motion will be shaped by institutions and technological innovation. Who issues money, who anchors it, and who bears the cost when things go wrong are central issues. But as money migrates onto programmable, cross-border rails, the resilience of the rail itself becomes part of what determines which monies are trusted. Digital money will be reliable only where sound institutions and robust technology come together.
Stablecoins, tokenised deposits, and central bank digital currency (CBDC) could reshape the monetary system, and the crypto system that is growing up around them is already bringing potentially large changes to the international monetary and financial order. Dollar-denominated stablecoins now extend dollar claims onto digital networks that sit outside the conventional banking perimeter, reaching crypto markets, remittance corridors, and economies with capital controls or weak monetary credibility. They may redistribute monetary rents across borders, could deepen demand for US Treasuries, and complicate monetary management for some economies. The international monetary system is acquiring a new digital channel, and the contest over who controls that channel is now underway.
Institutions are decisive, since technology expands the menu of feasible monetary forms but does not determine which of them comes to be trusted as money — that remains a question of policy design, public authority, and market structure: who issues money, who safeguards it, who draws the boundary between public and private money, and who bears the cost when things go wrong (Carletti et al. 2020, Duffie et al. 2022, Niepelt 2025). Yet the technology layer is neither trivial nor settled, and it will matter. Continuous, programmable, cross-border rails enlarge the attack surface, and the advent of quantum computing is likely to create challenges. Whether a digital instrument can serve as reliable money therefore depends on institutions and on technology together: cutting-edge technology cannot succeed without strong institutions, and sound institutions cannot rescue a rail that fails or is compromised.
In the latest CEPR/IESE Barcelona Banking Initiative report (Cecchetti et al. 2026), we make four arguments. First, money rests on general acceptance, which the central bank is indispensable in maintaining. Second, retail CBDC (rCBDC) reshapes deposit-funded banking rather than replacing cash. Whether it disintermediates banks depends on the central bank’s choices. Third, dollar stablecoins may be the prelude to a fast-growing tokenised finance ecosystem and are the most consequential development to date for the international monetary system. Whether they expand dollar use depends on how much they substitute for paper bills already in circulation. Their reach will depend on regulation, on the safety of the Treasuries that back them, and, in a cyber-exposed world, on the integrity of the rails that carry them. Fourth, the right regulatory principle is functional equivalence: comparable monetary risks call for comparable constraints. Tokenised deposits belong under bank-equivalent rules; stablecoins aspiring to circulate as money will require the institutional supports that come with it. Taken together, these arguments point to a hybrid monetary system, possibly fragmented across jurisdictions, in which the liabilities most likely to gain general acceptance are those that combine institutional anchoring with secure, resilient technology.
A useful starting point is general acceptance. A liability becomes monetary when users expect others to accept it at face value without reassessing the underlying balance sheet. General acceptance, in turn, rests on three properties. Singleness means one unit trades at par with any other. Transferability means claims move across users, institutions, and time at low cost. Elasticity means supply expands and contracts with demand for liquidity, including when liquidity demand spikes.
These properties look natural because the modern monetary system delivers them so routinely. They are not natural at all. Commercial bank deposits trade at par with central bank money because of a comprehensive institutional foundation: prudential regulation, supervision, deposit insurance, settlement in central bank reserves, and lender-of-last-resort support. The Silicon Valley Bank (SVB) episode of March 2023 makes the point. SVB’s depositors withdrew at par from an insolvent bank because their transfers settled on the Federal Reserve’s balance sheet, and because the Fed stood ready to extend intraday credit if SVB’s reserves fell short (Acharya et al. 2024). Singleness is a feature of the institutional architecture, not of the deposit contract.
The central bank is indispensable in any digital monetary system. It performs two functions no other institution can: providing a settlement asset free of private credit risk, and supplying liquidity elastically when private balance sheets cannot. Both are public goods. Even the newest technology reproduces neither — and the most resilient technology cannot manufacture them.
Technology does not substitute for institutions; it is a necessary complement. Continuous, programmable settlement enlarges the attack surface; an outage, a smart-contract exploit, or a broken cryptographic primitive can suspend transferability in an instant. To the institutional foundations of money we should therefore add a technological precondition: rails that are operationally resilient and cryptographically secure, and that can migrate to post-quantum encryption before quantum computers make today’s digital signatures forgeable.
rCBDC is often framed as a digital replacement for cash. The case for it on those grounds — financial inclusion, privacy, and monetary sovereignty — does not hold up well. On inclusion, public or regulated instant payment systems often do the job more efficiently; Pix in Brazil and UPI in India already do. On privacy, a poorly designed rCBDC could erode it rather than protect it. On sovereignty, the case is jurisdiction-specific: strong where domestic payment infrastructure is weak, weak where it is not. China, with Alipay and WeChat Pay running on central bank reserves, shows how little a public retail instrument adds where private instant payments already work.
The serious case for rCBDC is about banking architecture, not payments. Reliance on retail money issued by fragile, deposit-funded, too-big-to-fail banks is itself a problem. With the right design, an rCBDC offers a public alternative that strengthens competition and may reduce fragility. Concerns that retail public money would mechanically disintermediate banks are overstated. A theoretical neutrality result holds: if the central bank passes the proceeds of rCBDC issuance back to banks on the same terms as the deposits they replace, banks’ lending capacity need not shrink (Brunnermeier and Niepelt 2019).
Neutrality, however, holds only under conditions central banks are unlikely to meet. Exact equivalence requires the central bank to lend on deposit-equivalent terms — which would mean unsecured lending. Central banks do not lend without collateral, and doing so would expose their balance sheet, and ultimately the taxpayer, to losses. That is unlikely to change. So if the central bank continues to lend against collateral, it must choose which assets qualify and at what haircut. Those choices determine which institutions and activities get funding on favourable terms. As rCBDC grows, so does the central bank’s balance sheet, and with it the scale of those choices. A central bank doing this ends up directing credit across the economy — which is what state banks do. The case for rCBDC is real, but so is the risk to the central bank, including pressure for directed lending and threats to its independence.
Dollar stablecoins may be for the moment the most consequential digital development for the international monetary system, and the clearest instance of cryptoisation — the migration of money-like activity onto crypto rails — at global scale. They put dollar-denominated claims into circulation beyond the regulated US banking perimeter, in crypto markets, remittance corridors, and economies with capital controls or weak monetary credibility. The institutional architecture that anchors the dollar’s international role — trade invoicing, deep financial markets, reserve holdings, and the Federal Reserve’s ability to supply liquidity in crisis — survived earlier transitions in international monetary arrangements (Corsetti et al. 2023). The dollar still accounts for some 57% of foreign exchange reserves, with the euro a distant second; new rails reduce frictions but do not erase the network externalities, geopolitical power and public backstops that sustain that hierarchy.
Tokenisation does, however, open a new margin of competition. In a system that runs on digital networks, the credibility of a currency depends not only on macroeconomic fundamentals but on the cyber-resilience and data integrity of its rails. As cyber threats sharpen and as quantum computing erodes legacy encryption, currencies whose infrastructure is hardened may earn an ‘integrity premium’ (Rey 2025, Rey and Subran 2026). The premium attaches to the safest rail, not necessarily the largest: the first mover in encryption integrity need not be the first mover in stablecoin issuance. Technology is thus not a commoditised afterthought in currency competition; it is one of its determinants.
The rise of dollar stablecoins carries three macroeconomic implications. The first is public finance: where they displace domestic money, seigniorage shifts from central banks and finance ministries to private issuers — a privatisation of seigniorage by global actors. The second is demand for US safe assets. Major issuers concentrate their reserves in short-dated US Treasuries; Tether and Circle now hold more than Saudi Arabia (IMF 2025). By adding private demand for these instruments, dollar stablecoins reinforce the US world banker position — a digital pillar of exorbitant privilege (Gourinchas et al. 2025). The third is the risk of runs. Issuers buy Treasuries to back their tokens. Nervous holders can redeem en masse, forcing issuers to sell Treasuries and making this source of demand volatile. Outside the US, this cryptoisation cuts the other way: where dollar stablecoins substitute for weak local currencies, they erode monetary control and may deepen exposure to the global financial cycle. They may also open channels for capital flight and evading capital controls. Existing balance-of-payments and national-accounts frameworks do not capture wallet-based, pseudonymous, cross-border flows.
Whether dollar stablecoins matter internationally is one question; whether they work as money is another. Market capitalisation now exceeds $300 billion, but most reported volume reflects intra-exchange churn rather than payments, and the demand that exists comes mainly from inside the crypto ecosystem, with secondary use as a dollar store of value in inflationary economies. General acceptance for cross-border transfers, mainstream commerce, or as a substitute for bank deposits remains limited but could grow, particularly for cross-border settlement of trade in fragmented regions of the world (intra-Latin American or intra-African trade, for example).
On singleness, stablecoins fail in two ways: different tokens trade at different prices because issuers differ in credit quality and reserve composition, and any single token can lose par when holders doubt its reserve fund. USDC fell to $0.877 during the March 2023 banking stress, when SVB’s collapse trapped Circle’s reserves. Without settlement in central bank money, par convertibility is conditional — much as it was for the privately issued notes of the wildcat banking era (Gorton and Zhang 2023). On transferability, stablecoins offer 24/7 operation, but the relevant comparison is not legacy bank transfers — it is modern fintech alternatives that already outperform them on cost and speed. On elasticity, a stablecoin issuer cannot expand by extending credit, and without a central bank facility cannot meet sudden redemptions without selling reserves into a falling market. To these run vulnerabilities one must add operational ones: a stablecoin is only as reliable as the chain, bridge, and custody arrangements it depends on.
On functional grounds, stablecoins resemble money market funds more than bank deposits (Cecchetti and Schoenholtz 2025). Without a central bank backstop, liabilities promising par convertibility against marketable assets are vulnerable to runs. That vulnerability rules them out as general-purpose money but leaves room for specialised uses — bridging crypto and conventional finance, or serving as a dollar store of value where the local currency is unstable. Tokenised deposits are better placed to scale. Their advantage is not superior technology but institutional location: they remain claims on supervised banks, sit within prudential frameworks, may benefit from deposit insurance, and are connected to central bank settlement and, where necessary, liquidity support. Stablecoin issuers cannot match those advantages from outside the regulated perimeter.
A sound organising principle is functional equivalence: liabilities that create comparable monetary risks should face comparable constraints. The relevant question is not whether an instrument runs on a blockchain, but whether it functions as money — circulating at par, supporting payments at scale, and remaining stable under redemption pressure.
From this perspective, tokenised deposits should be allowed to develop under bank-equivalent rules: they are claims on chartered banks, already subject to prudential regulation and supervision and connected to central bank settlement and, where necessary, liquidity support. Stablecoins that aspire to circulate as money belong inside the same perimeter, with reserve standards, redemption rights, supervisory scrutiny, and an equity cushion. The closer a stablecoin comes to functioning as money, and the more public support it would attract in a crisis, the tighter the constraints must be. The history of money market funds shows that no-bailout commitments are not credible once an instrument is large enough.
Stablecoin regulation is moving forward in many jurisdictions. The US GENIUS Act creates a federal framework for payment stablecoins but requires only operational-adequacy capital, explicitly rejecting bank-grade standards. The EU’s MiCAR is more comprehensive but precludes central bank support, leaving open how stablecoins maintain par under stress. The Bank of England’s proposal points toward a narrow-bank model with central bank support. Each embeds an implicit answer to the same question: which institutional supports does a money-like liability require? The answers diverge enough to create scope for regulatory arbitrage. International coordination on minimum standards would be desirable, as embedding a lightly regulated stable coin in the heart of the financial system could be destabilising. But coordination proves to be difficult. As a result, we cannot rule out that a stable coin Gresham Law will apply and ‘bad’ stablecoins may drive out ‘good’ stablecoins.
A hybrid monetary landscape probably fragmented across jurisdictions. Stablecoins and tokenised deposits will coexist, joined in some jurisdictions by retail public money, and architectures will diverge — the US projecting dollar dominance through private stablecoins while foreclosing a retail CBDC; the EU betting on a more diverse and complete ecosystem with a rCBDC and a wCBDC and emerging economies pulled toward competing digital ecosystems. The dollar’s international role will gain a digital channel, though how far it expands depends on regulatory decisions, cross-border interoperability, and the cyber-resilience of competing rails.
Digital money is a contest over institutional power: banks defend deposit franchises and the rents from issuing money-like liabilities, while central banks defend seigniorage, monetary autonomy, and the public anchor of the monetary order. It is also a contest over technical integrity: in a cyber-exposed world facing the prospect of quantum computing, the safety of the rail is becoming a condition for trust, not a detail of implementation. Whether the instruments technology creates function as money depends on institutions and technology together. The policy question is not whether digital money will be public or private, but which private liabilities remain anchored in public institutions and are carried on rails secure enough to be trusted — and on what terms public institutions are prepared to provide that anchoring.
Source : VOXeu
Women remain underrepresented in the upper ranks of academia, but evidence on the mechanisms behind…
The steady decline in the relative price of equipment has long been seen as a…
Europe exports a large surplus of savings outside the continent each year. This column argues…
The search for a European safe asset has generated no shortage of proposals, but these…
A landmark shift in the international corporate tax system is taking shape. The introduction of…
Across advanced economies, workers have been receiving a smaller share of national incomes. This column…