Stablecoins and the race for digital money

Paul Samson and Luna Gao from the Centre for International Governance Innovation (CIGI) analyse the latest global developments in stablecoin and CBDC issuance and their impact on the greater financial sector.

Money travel has a clear direction. Digital money will be central to the future of money, payments, and financial sovereignty, which is not speculation nor about the latest app for your phone. 

Several trends have been overlapping, driven by programmable payments technology innovation, 24/7 digital commerce demand, and geopolitical competition for control of the dominant currency. Given that money is increasingly digital by default, the newest question addresses its future form and governance. 

Regional approaches to stablecoins

The US is moving toward a private-sector, dollar-backed stablecoin model, based on regulated issuers, reserve requirements, and market infrastructure. They see this as a chance to continue USD dominance. China has already adopted a central bank digital currency (CBDC), the e-CNY, which is now also bearing interest. The EU is currently working on its own CBDC, but at a rather slow and tentative pace. Many other jurisdictions, including Canada, Hong Kong, Singapore, Japan, and the UK, are still determining how to balance innovation, security, competitiveness, and sovereignty. These nations will likely need different types of digital money and must find ways to make them interoperable. Things are evolving quickly, and laggards risk becoming simply takers/observers in a digital money system they didn’t design or control.

Stablecoins (crypto-assets designed to hold a stable value, usually pegged to a fiat currency) are considered highly relevant for this future. Today, the market is overwhelmingly USD-based, and analysing where things stand now indicates how they might evolve. Of course, the scope of impact is broad and much remains uncertain. 

Figure 1: Range of stablecoin market capitalisation estimates

Data sources: Standard Chartered (2025), J.P. Morgan (2025), Coinbase Institutional (2025), Deloitte (2025), Bernstein Research via Yahoo Finance (2025), U.S. treasury via PoliticoPro (2025), Citigroup (2025), DefiLlama (2026)

The above market-capitalisation projections show why stablecoins are now a strategic policy matter. While current volumes are modest compared to bank deposits, money-market funds, and sovereign debt markets, the growth trajectory suggests a larger role for stablecoins as settlement instruments. Provided stablecoins grow in usage, they could act as a new global financial infrastructure layer. However, will this growth be gradual and contained, or will regulatory clarity and institutional adoption enable rapid scaling?  

In the US, the stablecoin legislation (GENIUS Act) has already changed market expectations. If the broader digital asset market-structure legislation, the CLARITY Act, proceeds, it is expected to accelerate institutional participation by clarifying the roles of securities and commodities regulators, trading platforms, custodians, issuers, and intermediaries. 

Figure 2: Asset breakdown of USDT and USDC

 

Data sources: Tether Transparency Reports (2026), Circle Transparency Reports (2026)

 

A stablecoin is only as strong as the assets backing it, the quality of disclosure, the redemption reliability, and the issuer’s regulatory framework. They depend on confidence, liquidity, operational resilience, and the ability to redeem under market stress. The above USDT and USDC asset breakdown helps illustrate both the appeal and the fragility of the model. 

Supporters believe regulated stablecoins can lower payment costs, improve settlement speed, expand USD access, and encourage financial innovation. Critics argue that stablecoins could create new channels for financial runs, regulatory arbitrage, illicit finance, privacy erosion, and dependence on private sector decisions. Can stablecoins scale safely without importing old financial risks into faster, more automated, and more globally distributed rails? Both the EU’s MiCA and the GENIUS Act detail multiple requirements for the assets backing stablecoins, as well as for disclosure and redemption. They require the issuer to fit within the domestic regulatory framework.

As they are the largest stablecoins, only USDC and USDT are considered in this scenario. However, many financial players are looking at other options and plan to expand into this space. More importantly, we don’t know what new offers might be coming. For example, in June 2026, a new stablecoin, Open USD, launched, backed by some of the world’s largest traditional financial and credit card companies, as well as several crypto companies. A model like Open USD could establish a shared stablecoin infrastructure among multiple companies, potentially open-source, aiming to take transaction revenue from closed-source issuers. Only time will tell how this evolves.

Figure 3: Comparing stablecoin US Treasury holdings

Data sources: U.S. Department of the Treasury (2026), Tether Transparency Reports (2026), Circle Transparency Reports (2026)

Stablecoins are also becoming large enough to be relevant for sovereign debt markets. Large issuers hold substantial reserves in short-term US government securities, and if the market expands significantly, stablecoin issuers could become the largest Treasury buyers. This means that private USD stablecoins could extend dollar dominance by creating new demand for USD-denominated safe assets. However, this comes with trade-offs. High use of USD stablecoins could increase digital dollarisation in smaller economies, weaken monetary-policy autonomy, and make domestic payment systems more dependent on foreign-regulated infrastructure. It could also tighten the link between crypto-market stress and Treasury-market liquidity. So, while stablecoins could strengthen the USD, it would also create new vulnerabilities inside it.

That said, the future is unlikely to be purely private stablecoins or CBDCs and more likely hybrid: commercial bank money, tokenized deposits (through banks), private stablecoins, and CBDCs will coexist. Perhaps the most important policy question will therefore be interoperability – the interface between public and private money, domestic and cross-border systems, regulated and decentralised infrastructure, and different legal jurisdictions.

All of this has implications for countries seeking to act as system intermediaries or protect their own monetary sovereignty. For example, for Hong Kong, its role as a financial bridge between China and global dollar markets makes stablecoin governance central. Canada has a different yet significant opportunity, as it is not expected to dominate global stablecoin issuance. However, it might lead by designing trusted rules for interoperability, reserve transparency, privacy protection, prudential safeguards, AML compliance, and cross-border compatibility. In other words, a smaller country’s advantage could be the credibility of its regulatory design and its trusted financial infrastructure.

Although stablecoins are on a possible track to be a big deal, how they will get there remains unclear. No killer app to go mainstream is on offer yet, so the question is whether stablecoins will achieve significance in their present decentralised, private form, or whether they need to be more managed and centralised. There are also alternative futures in which deposit tokens or tokenized deposits (managed by traditional financial institutions) achieve this instead, as well as a scenario in which China’s digital e-CNY, whose infrastructure is built, gains global adoption. And there are, of course, unknown technological innovations to come that could shake things up. 

The key policy challenge remains: how can stablecoins capture the benefits of faster, more programmable money without making the future monetary system more fragile and opaque? While the stakes could be enormous, the outcome is anything but settled.

About the authors

Paul Samson, president of the Centre for International Governance Innovation (CIGI), is an expert on the global economy, climate change, and transformative technologies. He served in several senior roles with the Government of Canada and was co-chair of the G20 Framework Working Group on the global economy. He holds a doctorate in international relations from the Geneva Graduate Institute and is co-host of the podcast Policy Prompt.

 

 

Luna Gao is a Policy Innovation Intern at the Centre for International Governance Innovation (CIGI), where she conducts research on global supply chains, digital assets, and emerging technologies. She is currently pursuing a bachelor's degree in Systems Design Engineering at the University of Waterloo.

 

 

About Centre for International Governance Innovation (CIGI)

The Canada-based Centre for International Governance Innovation (CIGI) is an independent, non-partisan think tank whose peer-reviewed research, foresight, and trusted analysis influence policymakers to innovate. With the engagement of a global network of experts and contributors, CIGI tackles the governance challenges and opportunities of data and transformative technologies, including AI, and their impact on the economy, security, democracy and, ultimately, societies.