Digital technology is changing the way we conduct transactions. The use of cash has declined rapidly. For example, it went from representing 68% of daily transactions in the eurozone in 2019 to 40% in 2025, and cash is barely used in the Nordic countries. Euro banknotes in circulation represent approximately 10% of the monetary mass; The rest is mainly provided by the banking system. In fact, money is already mostly digital. Digital instruments, such as cryptocurrencies, digital wallets and stablecoins – private digital currencies that have a currency, such as the dollar, as a counterparty in the form of cash, deposits or short-term Treasury bonds – use new infrastructures, new “rails”, but they differ in who issues them, what backs them, how they maintain trust in the currency and how they distribute the risks and benefits of their use.
Technology and the institutional framework come together in digital money. Near-instant settlement, programmability, and cryptographic security measures are increasingly available. However, technology expands the possibilities of the monetary system, but does not determine its architecture. The question lies in who issues the money, who makes it stable and who bears the losses if any. For example, tokenized deposits are digital rights issued by a commercial bank that represent a one-to-one collection right on the fiat currency held at that institution. They act as a technological envelope for bank money, allowing it to move through the blockchain, but maintaining the regulatory and supervisory protections of traditional banking.
This is not the case with stablecoins, whose objective is for the currency to maintain parity with the dollar – currently, 99% are denominated in dollars – just like a monetary fund. The United States is promoting them in the hope that they will strengthen demand for short-term Treasury bonds and thus finance public debt. Tether and Circle, the two stablecoins with the highest volume today, now collectively hold more US Treasuries than the reserves accumulated by Saudi Arabia. They will tend to promote dollarization in economies where the currency is not stable, as well as facilitate international transfers. There's more: they have displaced cryptocurrencies, such as bitcoin, to carry out illicit activities and evade international sanctions.
Central banks became concerned about issuing digital currency when Facebook (currently known as Meta) launched the Libra project, which was seen as a potential threat to monetary sovereignty. The United States and the eurozone have taken very different paths. The US Administration has even banned the study of the digital dollar, leaving digital currencies in the hands of the private sector, while the European Central Bank (ECB) is considering the digital euro, for both wholesale and retail transactions, as an element of both transaction efficiency and European sovereignty. The body chaired by Christine Lagarde wants to preserve the monetary anchor and the payment system, which today depends largely on digital infrastructure and American companies.
As we stated in the report titled Digital Money (CEPR-IESE, 2026), digital money is both a technological issue and an institutional and political issue. The different actors strive to achieve their objectives. Commercial banks want to protect their deposit franchises and cheap financing, while central banks want to preserve seigniorage—the profit they make from issuing currency—, monetary autonomy, and the public anchor of the monetary order. Governments may have debt financing objectives, as in the United States currently, and geopolitical objectives to impose or evade international sanctions. China promotes the yuan and Europe the euro to gain autonomy, and countries like Russia and Iran are fleeing the dollar to avoid extraterritorial sanctions from the US Administration.
