Digital money: the global battle that will define the monetary future

As Europe moves forward with the digital euro and implements the MiCA (Markets in Crypto-Assets) regulatory framework, stablecoins are emerging as a global private blockchain-based monetary infrastructure with international potential and a circulation volume exceeding $300,000 million, according to CoinGecko.

First, CBDCs (Central Bank Digital Currencies) or Central Bank Digital Currencies represent the evolution of public money in an increasingly digital environment. The digital euro project managed by the European Central Bank introduces a hybrid model: the central bank will issue money while distribution and the relationship with the user will take place in the hands of financial entities.

The aim is to preserve the stability of the system by preventing massive leakages of deposits, while at the same time guaranteeing citizens access to a public, secure and universal payment medium. However, the final design will depend on how key elements are resolved. rent limits, privacy, cyber security or to integrate with the existing Pagos ecosystem.

On the other hand, regulated stablecoins – especially electronic money tokens (EMTs) under the MiCA regulation – represent a private tokenized alternative. Typically 1:1 to trust and for the most part stored by liquid assets, recommendations act as programmable digital assets that can be transferred in instant form to blockchain networks and operate on a global scale.

Various financial entities are being investigated in Europe common affairs Euro-denominated EMTs to compete with stablecoins pegged to dollar impulses via issues like Tether or Circle, which currently dominate this market, although the risks of concentration, reserve opacity and potentially massive liquidation salts remain.

The United States has allowed the private sector to facilitate the digitization of dollars through stablecoins

Along with CBDCs and regulated stablecoins, a third model is emerging with particular relevance to the bank: depository tokens.

These are traditional bank deposits represented on the blockchain, which retain the same legal and regulatory nature as conventional deposits – including deposit insurance – and allow transfers and liquidations 24/7 without changing the accounting nature of the deposit or the credit function of the entities, but may change the dynamics of liquidation and liability for deposits.

We’re creating a way for counters to compete in efficiency and programmability without them relinquish control over bank money Don’t be afraid of paper in financial mediation.

From a geoeconomic point of view, three clearly distinct models are observed. The United States has allowed the private sector to lead the digitization of the dollar through stablecoins, generating what many call a “tokenized dollar” that expands across emerging markets and digital platforms without the need for the Federal Reserve to launch a minority CBDC in the short term.

China, on the other hand, has opted for a state model through a digital yuan run by Banco Popular de China, which is progressing in massive pilots and seeks to strengthen monetary sovereignty, reduce dependence on the dollar-dominated global financial system, and expand the capacity of internal supervision.

The future of money will not be a battle for cash, but a way to stabilize digital financial infrastructure standards

Europe intends to find itself at a transition point: strict regulation, the gradual development of the digital euro and the goal for a competitive, secure and harmonized payment infrastructure with the community values ​​of privacy and financial stability.

These models respond to different strategic priorities. Indeed, CBDC offers institutional stability and support; Regulated stablecoins bring speed, scalability and global potential; and tokenized deposits allow banks to maintain their historical papers in a more digital financial infrastructure. The key will be interoperable: companies and entities will likely use different forms of digital money depending on the use case, combining operational efficiency, compliance and security.

The future of money will not be a battle for money, but a way to stabilize digital financial infrastructure standards. With the validity of MiCA, the introduction of the digital euro and the progress of the European Bank in tokenized money, Europe is starting to position itself in an environment where scale and speed will be decisive and where the rules of the new monetary system will be decided here.

*** Alfonso González Guerrero, Afi Professor of Global Education.