What's New in CBDCs & Stablecoins for 2024?

As we discuss in our latest research, in relation to other payment technologies, CBDCs and stablecoins are new entries to the market. Cryptocurrencies were the first digital currencies to gain significant notoriety. Early digital currencies, such as eCash in 1990, put into practice the concept of safely and privately transferring currency tokens between individuals online. In 2009, the launch of Bitcoin marked the beginning of decentralised blockchain-based digital currencies. 

Stablecoins emerged in the mid-2010s, with the goal of combining the benefits of digital currencies with the stability of fiat currencies. Tether, one of the earliest launched stablecoins that continues to maintain its 1:1 peg to the dollar, was launched in 2014 to address volatility issues with cryptocurrencies. This rose to prominence quickly, surpassing Bitcoin in 2019 to become the most traded cryptocurrency. By the late 2010s and early 2020s, several other stablecoins had also risen to prominence, such as Circle’s USDC and the algorithmic stablecoin DAI.

Stablecoins have repeatedly faced concerns and experienced crashes, the most recent being Terra in 2022. Tether has also faced questions about whether it holds sufficient fiat reserves, with a fraud investigation in New York concluding that its coins were not fully backed by US dollars. These concerns linger in the public consciousness, contextualising stablecoins’ current market position. 

The concept of CBDCs has its roots in the rise of digital payments and cryptocurrencies, gaining momentum in the late 2010s as banks sought to modernise their monetary systems. China, an early adopter, began researching the topic of issuing a CBDC in 2014, driven by the need to offer a state-backed alternative to cryptocurrencies. Today, the e-CNY pilot study is the largest of any nation exploring CBDCs. 

COVID-19 further accelerated state interest in CBDCs. The decline in cash and the need to distribute efficient, digital means of economic relief to citizens meant that many governments turned to CBDC research. Currently, 134 countries, constituting 98% of global GDP, are in various stages of research or development regarding the creation of a national CBDC.