Private Cryptocurrencies versus Central Bank Digital Currency (CBDC)
The issue of private cryptocurrencies versus central bank digital currency (CBDC) has two aspects. One is the systemic dimension; the other one is about the economic efficiency of the means of payment. In both respects, there is currently little to be said in favour of private cryptos.
The future of money between central bank digital currency (CBDC) and stablecoins. The Diem example
The future of money is digital – and which money will come out as the dominant and system-defining one will be decided in the competition between central bank digital currency (CBDC, that is, sovereign money, for example as a digital dollar, euro, pound,...) and private stablecoins from new financial corporations. The prototypical case in point is Diem, the modified successor plan to the stablecoin Libra initiated by Facebook in 2019. Whether there will still be room for other types of money between CBDC and stablecoins in the long run – especially bankmoney, or money market funds as a means of payment – is questionable.
Libra. Facebook’s plan for a global digital currency
In June 2019 the Facebook-initiated Libra Association presented a White Paper on its project of a private global currency and payment system to be launched in 2020, called Libra. It was conceived of as a currency based on a basket of international reserve currencies such as the US dollar, euro, yen, pound, and a few more. This met with strong opposition from the central banks and politicians concerned. They feared for the sovereignty and status of their currencies. The paper presented here makes an assessment of the Libra concept.
U.S. bans retail digital dollar.
Continued privatisation of money challenges monetary sovereignty
On July 18, 2025, President Trump signed a package of three laws passed by U.S. Congress:
- the GENIUS Act (Guiding and Establishing National Innovation for U.S. dollar-denominated Stablecoins)
- the CLARITY Act, including regulation on cryptocurrencies like Bitcoin and their exchanges
- the ANTI-CBDC Surveillance State Act.
The remarkable and controversial part of that package is the third one. In line with President Trump's executive order from Jan 23rd, it prohibits the U.S. Federal Reserve from issuing CBDC, more specifically, a retail digital dollar to non-bank businesses and individuals, whether directly or indirectly via intermediaries such as payment service providers, including banks in this function. The regulation does not apply to developing a wholesale digital dollar for interbank use only, complementing the banks' privileged use of reserves (central-bank book money).
Irrespective of this, stablecoins are nevertheless in direct competition to bankmoney.
The reason given for the Anti-CBDC Act is to protect private transactions from alleged government surveillance related to CBDC (unsubstantiated so far). The more likely reason is to shield private stablecoins from sovereign digital-dollar competition, giving private stablecoins a privileged and unique position in the market of asset-backed digital means of payment.
• The Genius, Clarity, and Anti-CBDC Acts, Kiplinger, as of July 24, 2025
• House passes historic crypto bill, CBS News, 17 July 2025.
• Trump Signs Stablecoin GENIUS Act: Here’s What To Know, Forbes 17 July 2015.
It looks like the conservative faction of central bankers, the banking lobby and the big tech crypto lobby have retained the upper hand for now. Of course, these three do not form a 'united front'. For in the public money circuit among non-banks
1. central-bank money and U.S. Treasury money (metal coins and paper bills)
2. bankmoney (deposit or book money of commercial banks), and
3. the variety of new private cryptocurrencies
are direct competitors to each other.
The monetary sovereignty of the US Fed and US Treasury is tied to small coins, dollar notes and central bank reserves. With the gradual disappearance of cash and the banks' just fractional reserve requirements, that monetary sovereignty has already diminished considerably in favour of the systemic dominance of bankmoney - which has become a private money surrogate given para-sovereign status. By deliberately favouring the spread of private stablecoins while prohibiting a central-bank issued digital dollar, the process of replacing US sovereign money with private money will intensify.
The remaining part of monetary sovereignty in the form of the dollar as the official denomination and unit of account thus increasingly risks becoming an empty shell: Stablecoins in their own name will continue to represent the value of US dollars, but the lion's share of it will be even more privately issued money for private gain than is the case today. In the event of a crisis, however, the US Treasury and Federal Reserve will undoubtedly be forced to step in as guarantors and refinancers of those private money issuers.