CBDC and Stablecoin : A Comparative Analysis

Central Bank Digital Currency is the innovative response of the Central Banks of some nations in response to cryptocurrency. It is simply the digital version of the national currency on the blockchain. On the other hand, a Stablecoin is a type of cryptocurrency that is stable in value because it is pegged to a fiat currency on a 1:1 ratio.

This discussion will focus on a comparative analysis of the two types of digital assets or currency innovation on three points. The three points are Blockchain technology, network and control, and global impact.

Blockchain Technology:

Both CBDC and Stablecoins use the core technology of the cryptocurrency blockchain. It means transactions are processed through a distributed ledger. It therefore means there is a validation process for this to happen. What is the validation process for a Stablecoin and a CBCD like digital Yaun and eNaira?

Network Control:

Stablecoin operates in a more decentralized nature, while CBDC operates in a centralized manner. For CBDC, the central bank decides on the supply of currency. For a stablecoin, it is the market forces that control the supply, and it operates on another blockchain such as Smart chain, Ethereum, Tron, Solana etc. Also, stablecoin operates an open-source software, unlike a CBDC that may likely operate a proprietary codes and not open-source software.

Global Impact:

Stablecoins such as USDT, BUSD, USDC etc., have global use as they are pegged to the hard currency-the dollar. However, CBCD can only be used within the nation of its issuance. As such, this poses limitations. Also, people will prefer to use USDT over eNaira because of the purchasing power of USDT.

What do you think about stablecoin and CBDC? Do you think the two currencies will compete, or will the government ban stablecoin? How will exchanges exist without stablecoin? Kindly drop your comment. This thread is inspired by this journal article on Google Scholar on the possibility of the coexistence of CBDC and Stablecoin. Here is the link to the article.


Thank you @Progrezz for coming up with this discussion.

Ultimately the fate of CBDCs and stablecoins may be decided by the significant forces of regulation and adoption.

While CBDCs will be issued under the auspices of central banks, stablecoins are potentially subject to regulatory oversight from multiple agencies, depending on their classification as assets, securities, or even money-market funds. Under scrutiny from the Financial Action Task Force, such regulation may be extended across borders.

While it is too early to predict the impact of greater regulation on stablecoins, innovation continues apace with the likely emergence of many more (and newer) varieties in coming years. In contrast, early efforts to issue CBDCs have been met with only moderate adoption.


That’s correct.

In the long long run the companies issuing Stablecoins like Circle may be regulated the same way bank :bank: are regulated. This is because they do what banks do in a way. Issuance of money and investing in short term assets.


Something that I’ve really been wondering about is WHY there is a need for a CBCD. Maybe someone can help me understand the purpose of these.

Are most currencies not already hybrid digital? Many places are card only, which is in fact a digital form of currency. Is it purely for the purpose of using a distributed ledger?
I understand the want to control both the narrative and direction of digital currencies (by the government) but is this really an efficient and effective way to do so?

Also, as an American, having a CBCD might be vastly different than any other country (considering we have the world reserve currency), so what kind of differences do we expect in that?

And just a tidbit, for some reason I get an article about Papa Johns when i click your link. Unclear if my problem or the link


Here are the reasons i think the central banks are creating CBDC.

  1. Competition with Stablecoins: They think if a crypto could be stable why not have their currency on blockchain.

  2. The web 3 Factor: you see crypto and Blockchain promotes a P2P transactions. Thereby removing the need for centralization. This is what underpins Cryptocurrency. CBDC also work in the same way. I think the government want to catch up with the trend.

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There are types of Stablecoin.

We have them based on collaterisation or pegging to other assets.

  1. Fiat pegged Stablecoins like USDT, BUSD etc.

  2. Commodity pegged Stablecoins.

  3. Algorithm pegged Stablecoin.

UST of Luna is an algorithm pegged Stablecoin. It means, it’s smart contract or code that determines its value. There is no asset backing it up.

The reason why UST failed is because it’s controlled by algorithm and not pegged to any assets.


Thanks @Progrezz for this eye opening comparative analysis on stablecoin and CBDC.
I want to give my thoughts on the three pertinent questions asked in the discussion.

1.What do you think about stablecoin and CBDC?

I believe the stablecoin and CBDC can both work together to create a parallel economic system. Since stablecoins are either pegged to the dollar algorithmically,or are pegged commodity also fiat backing. So you can use the stable coin to purchase digital assets lile bitcoin and etherium and also participate in different because the dollar is a universal means of value exchange. CBDC can only be used within the country that produced it with the Central bank (CB) regulating it. With the CBDc being used by the investors in the crypto market the inflation rate can be controlled it might seem that way.
But there might be more to this development of CBDC by the CB :

  • It could lead to control by the government and
    CB so it removes the advantage of decentralization and gain / profit of the citizens.

  • Transactions will be centralised and monitored and the datas cannot be erased in the ledger.

*It can be used to definitely sillence oppositions and also oppress certain citizens who don’t believe in certain course of actions the government takes.

  • Systematization of financial sovereignty is very paramount for every individual citizen but with the CBDC it will becomes hard.
  1. Do you think the two currencies will compete, or will the government ban stablecoin?

I think the two currencies can exist and not compete with each other,one
complementing the other although it depends on what and how the economies of the country is doing . The government can’t ban stablecoin because I think it’ll be in a decentralized wallet also .

  1. How will exchanges exist without stablecoin?

I believe exchanges can’t exist without stablecoins because of the backing in the dollar currency.
Although I might be wrong about most of my analysis. But I don’t see exchanges exist without stablecoin.


You have made a very commendable comment. However, from the quote, do you mean to say CBDC is a fungible currency? With what you said you are referring to the feature of NFT and not CBDC. Kindly clarify.


What a lovely comment. I think stablecoin can be banned because it is a company that runs the software. What the government needs to do is to ban the company from doing business and that will be the end.

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It has been awhile since I have listened to this panel, but @Angle might find some of the answers you are looking for in this panel discussion about CBDCs. There is a good “pro-con” approach and good representation of perspectives.

@Twan also provided a strong recap in the comment section. Super short answer appears to be ease of use/transparency versus privacy and control.


I will take out time to listen to it. Thank you

From technical and policy point of view, do you think CBDC is the right project for Central Banks? To me the success of CBDC would cause a major disruption to commercial banks. Will there be need for banks?

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@Progrezz Commercial banks will likely play a key role in large-scale CBDC rollouts, given their capabilities and knowledge of customer needs and habits.

Commercial banks have the deepest capabilities in client onboarding (including know your customer) and the execution and recording of transactions, so it seems likely that the success of a CBDC model will depend on a public–private partnership (PPP) between commercial and central banks, or at minimum a less formal collaborative model that promotes a digitized monetary environment across the banking and payment value chain


I think It is too early to confidently forecast the trajectory and endgame for CBDCs and stablecoins, given the multitude of unresolved design factors still in play. For instance, will central banks focus first on retail or wholesale use cases, and emphasize domestic or cross-border applications? And how rapidly will national agencies pursue regulation of stablecoins prior to issuing their own CBDCs?


Yes. These are valid questions. From the pilot of the Nigeria eNaira experiment. The design of the CBDC involves the following.

  1. Utility for the people.
  2. Providing infrastructural and services through commercial banks.

I was thinking the commercial banks will be disintermediated with the innovation but they’ll be part of the value chain.

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Nice write up @Progrezz, Differences of CBDC and stablecoins
Stablecoins are not under the regulation of a single organization.

The task of policing central bank digital currencies should fall under the purview of each nation’s central banks. No other currency, not even the fiat currency it is backed by, can be exchanged for stablecoins.

Governments will be issuing CBDCs, so they may be exchanged for fiat money and have general exchange values.

They are decentralized, stablecoins. Digital currencies issued by central banks are centralized because they are managed by the government of a nation.

When CBDC vs. stablecoins is discussed, the security behind stablecoins is inferior compared to central bank digital currencies. The aforementioned law would result in substantially better security features being developed for central bank digital currencies.

There are no definite tax regulations governing stablecoins…

The way the financial systems operate is the main distinction between stablecoins and CBDC. Digital currencies issued by central banks are fundamentally centralized, whereas stablecoins tend to adhere to the open source and decentralized ecosystems philosophies. However, it cannot be denied that the regulation underlying the government-backed digital currencies makes them appealing to laymen who are still largely uninformed about cryptocurrency enabled Web3. Central authority lacks power over stablecoins to ensure more private and secure transactions.


This is a very interesting point that needs expansion. What is the business model of Stablecoins businesses? How do they make money?


This brings us to the concept of factional reserve. What if the short term investment of the reserve does not go well? What if the investment decision of the stablecoin businesses result in a loss outcome? Could this cause a depegging?


Differences between Stablecoins & CBDCs

Stablecoins have become a standard for international transactions and investments. However, CBDCs will only be as powerful as the fiat currency of that particular country. If a government or organisation doesn’t accept INR for trade, they will not accept the INR-based CBDC, if and when it comes out.

Stablecoins are cleverly pegged to only the popular currencies like the US Dollar and undergo strict auditing to preserve international trust.

stablecoins are backed by an equal amount of fiat currency. You can always exchange a stablecoin for an actual dollar which is stored in the reserves. CBDCs don’t have any assets backing them, only the good old promise of the country’s central bank, it is how all fiat currencies work.


What do you mean by Stablecoin has become a standard for international transactions and investments?
Does international reconciliation accept Stablecoin for reconciliation? Do global energy trades deal on Stablecoin? I think you should clarify what you mean.

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