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The false dichotomy between stablecoins and CBDCs overlooks their shared DNA: programmable integrity.
Summary
- Stablecoins vs. CBDCs is a false fight: They solve different problems — stablecoins excel at open, global liquidity, while CBDCs suit sovereign, privacy-sensitive public payments.
- Programmable money is the real prize: Both run on blockchains, enabling traceable, conditional, and efficient distribution of welfare, pensions, subsidies, and emergency aid.
- Digital sovereignty requires coexistence: Governments that harmonize stablecoins and CBDCs can preserve monetary control and stay competitive in cross-border finance.
Ultimately, both stablecoins and CBDCs are programmable money that run on immutable ledgers to enhance auditablity and accountability. That’s why governments must adopt both to offer efficient services to their citizens, thereby maintaining national sovereignty and promoting global coordination.
The polarized world of CBDCs and stablecoins
Some governments and central banks have adopted a critical stance toward stablecoins. To begin with, central banks see stablecoins as instruments of currency substitution, as they directly compete with domestic fiat money. Central bankers in major emerging economies have cited IMF research to explain how stablecoins can challenge sovereign control over money supply and interest rates. Consequently, many regulators advocate prioritizing central bank digital currencies over privately issued stablecoins to maintain trust in sovereign money and preserve financial stability
Further, as retail investors include foreign-currency-denominated stablecoins in their portfolios, capital flow management (CFM) would become increasingly challenging. Stablecoins are also expected to lead to bank disintermediation, higher credit costs, and a loss of seigniorage.
Despite these criticisms, stablecoins currently hold a market cap of almost $316 billion. In the last year, stablecoins have done $46 trillion in total transaction volume ($9 trillion if bots and inflationary activity are filtered out). That is five times PayPal’s throughput and over half of Visa’s.
Evidently, stablecoins have become a premier example of blockchain utility with clear product-market fit. Conversely, proponents of open decentralized networks have raised significant concerns regarding CBDCs. Public discourse rightly emphasizes the imperative of privacy. To achieve mass adoption, sovereign digital currencies must be architected to protect user data while maintaining regulatory compliance, turning privacy into a core feature rather than a trade-off.
Critics have also pointed out that CBDCs lack transparency because they rely on centralized private blockchains that are closed to public verification. Critics further note that closed-loop networks may lack the public auditability required to fully establish trust in the system. The next generation of CBDC architecture is shifting from closed-loop systems toward verifiable, privacy-preserving frameworks to foster greater public trust.
The traditional friction between centralized control and decentralized efficiency is dissolving. Forward-thinking regulators are now calibrating systems that merge the resilience of open standards with the stability of sovereign oversight.
Despite these criticisms, the Atlantic Council think tank has reported that three countries have an active CBDC, 49 countries are in the pilot phase, 20 nations are currently developing the tech, and 36 countries areresearching it. It demonstrates that CBDCs are very much in fashion with governments and central banks. So, rather than prioritizing CBDCs over stablecoins or vice versa, governments must start acknowledging both since they serve different purposes. Governments would benefit by leveraging the underlying blockchain technology to offer both stablecoin and CBDC-based services for their citizens.
Embracing blockchains and programmable money
Certain government transactions require privacy and anonymity. For example, CBDCs are critical for confidential citizen support programs and aid distributions. Similarly, stablecoins can help distribute subsidies and welfare payments.
Blockchains help efficiently issue and distribute government assets in accordance with predefined requirements. As programmable money, they can be optimized for recurring, high-volume asset distribution to large groups of recipients, such as pension holders and subsidy beneficiaries.
Depending on requirements, governments can tokenize national digital currencies or welfare-program-specific benefit tokens, thereby providing both stablecoins and CBDCs as needed.
Since legacy distribution channels frequently encounter friction and leakage, blockchain-based infrastructure ensures traceability and precise allocation. Governments can also pre-program the distribution based on identifiable attributes, such as age (for pensions), location (for agricultural subsidies), and status (for healthcare benefits).
With blockchains, governments can more easily ensure that only verified, eligible citizens receive benefits. Such a comprehensive, financially inclusive framework guarantees privacy-preserving CBDC distributions and transparent stablecoin distributions for public benefits.
Blockchains are thus the appropriate tech framework for governments to timely release funds and embed condition-based eligibility rules for payment. The programmability of stablecoins and CBDCs is thus necessary for governments to enforce policy decisions and achieve their goals by implementing them technically.
Most importantly, since CBDCs and stablecoins run on blockchains, they help maintain an immutable record of all government transactions. Plus, on-chain metrics and analytics platforms help in real-time monitoring of fund distribution and ensure assets are utilized appropriately.
Such a tech-based service delivery system enables automatic reconciliation of government-allocated budgets and provides complete transparency through publicly visible distribution data. This is essential for digital payments of social benefit schemes, pensions, emergency funds during national crises, and other subsidies in the agriculture, education, and healthcare sectors.
As adoption data suggests, both stablecoins and CBDCs have found their respective clientele and are thriving in siloed ecosystems. It’s time to bring the two together under the ambit of government services for streamlined delivery.
Governments often need to balance national interests while keeping cross-border transactions open for international cooperation. Stablecoins and CBDCs can help citizens gain immediate access to digital financial services and reduce friction in business, trade, and assistance programs.
It’s time to stop the either-or approach to stablecoins and CBDCs and embrace both.
