Critique of Central Bank Digital Currencies
Changpeng “CZ” Zhao, the ex-CEO of Binance, recently criticized Central Bank Digital Currencies (CBDCs), labeling them as “outdated” in light of the rapid growth of stablecoins. Speaking at the WebX conference in Tokyo on August 25, Zhao shed light on the shift in governmental attitudes towards digital currencies, particularly emphasizing the rising approval of stablecoins through newly established regulatory frameworks. These developments are evident in places like Hong Kong, with its Stablecoin Ordinance, and the U.S. with the GENIUS Act aimed at advancing stablecoin adoption.
Stablecoins vs. CBDCs
Zhao made a bold claim during his address, asserting,
“Central Bank Digital Currencies are already outdated. In contrast, stablecoins are gaining more attention.”
His statement reflects the growing prominence and market valuation of stablecoins, which, according to Standard Chartered, could reach a staggering $2 trillion soon, a significant leap from its current valuation of approximately $260 billion.
In his discourse, CZ articulated the advantages of stablecoins over CBDCs, arguing that stablecoins are more likely to gain consumer acceptance due to their backing by tangible assets, which offers a sense of security for users. This change in narrative marks a notable shift, as even historically resistant nations, such as China, are now examining stablecoin alternatives to counter the influence of U.S. dollar-backed stablecoins. Despite a total ban on cryptocurrency trading and mining since 2021, officials in China are exploring the feasibility of creating a yuan-backed stablecoin.
Historical Context and Future Outlook
Historically, some nations have ventured into CBDC experimentation starting from around 2013, but such initiatives have often sputtered as interest in stablecoins surged. CZ attributed the waning demand for CBDCs as a core reason behind the stagnation of these projects, with only a handful making significant progress, such as the Bahamas’ Sand Dollar, Nigeria’s eNaira, and Ghana’s e-Cedi. On the horizon, the European Central Bank is pushing forward with plans to issue a digital Euro, targeting a launch by October 2025.
In light of these developments, at least ten countries have suspended their ambition to implement CBDCs in favor of fostering stablecoin ecosystems. The passage of the GENIUS Act in the U.S. has notably accelerated this trend. Countries like Japan, Denmark, Finland, Singapore, South Korea, and the United States have paused or abandoned their CBDC pilot programs, citing challenges like excessive costs, testing complexities, or insufficient retail applications. Recently, the Bank of England has also considered delaying its plans for a digital pound, as the focus increasingly shifts toward stablecoins. Although a final decision awaits confirmation, the trend strongly encourages banks to explore innovative payment solutions that might offer benefits parallel to those envisioned for CBDCs, such as tokenized deposits.
