The Blogs: New Monetary Trilemma: CBDCs, Stablecoins and Tokenized Treasuries — Which Wins? | Vincent James Hooper

The coming decade will be judged by how we digitize trust. That is the simple political economy at the heart of the CBDC versus stablecoin versus tokenized-treasury debate. Each instrument promises to modernize payments, shrink frictions and redefine who controls the plumbing of finance. Yet they are not interchangeable. They are competing visions of money — with distinct governance models, geopolitical implications and social trade-offs.

I: The Central Banker’s Answer — CBDCs

Central Bank Digital Currencies (CBDCs) represent sovereign money in programmable form — digital legal tender issued by the state, designed to ensure monetary sovereignty in a digitized economy.
Advocates tout their ability to streamline welfare transfers, strengthen financial inclusion, and preserve the central bank’s role in a future where private payments dominate. The European Central Bank’s digital euro embodies this logic: a public good designed to counterbalance Big Tech and private tokens, guaranteeing universal access to risk-free digital money.

Yet CBDCs are politically heavy and operationally complex. They raise profound privacy and surveillance questions — who monitors the ledger, and under what authority? Programmable CBDCs could, in principle, restrict spending or impose expiry dates on funds, prompting civil-liberties debates about the boundaries between monetary policy and social engineering. The philosophical divide is deep: CBDCs are trust in state systems, while stablecoins represent trust in code and corporate governance.

The Trump 2.0 administration has openly rejected a U.S. CBDC, framing it as “government surveillance money.” Washington instead favors regulated, dollar-backed stablecoins — maintaining U.S. monetary influence globally while avoiding domestic political backlash. The contrast with the EU could not be starker: Brussels is advancing the digital euro as an instrument of sovereignty, not surveillance.

II: The Market’s Solution — Stablecoins

Stablecoins are privately issued, typically dollar-pegged tokens that promise stability and usability across global payment systems. Their appeal lies in speed, interoperability, and innovation — they integrate seamlessly with decentralized finance (DeFi), cross-border payments, and fintech rails that traditional banks can’t match.

For U.S. policymakers, stablecoins are a strategic export tool. In lieu of a CBDC, regulated stablecoins such as USDC or PayPal USD sustain the dollar’s global reach. Legislation such as the Clarity for Stablecoins Act and support from the Treasury indicate a policy pivot toward “dollarization by private proxy.”

Still, stablecoins’ stability is not guaranteed. Their peg depends on reserve quality, transparency, and regulatory oversight. Weakly collateralized coins risk “digital bank runs,” while even fully backed ones raise systemic questions if they siphon deposits from commercial banks.
In emerging markets, the flood of dollar stablecoins could undermine local monetary policy and accelerate digital dollarization — an unspoken geopolitical extension of U.S. soft power.

III: The Yield Engine — Tokenized Treasuries

Tokenized Treasuries, the quiet revolution of 2025, bridge traditional finance and blockchain infrastructure. These are digital representations of U.S. government securities, issued and traded on blockchain platforms, offering real-time settlement, transparency, and reduced transaction costs.
For institutional investors, they are a pragmatic blend of yield, safety, and liquidity — a digital version of the safest asset in the world.

The market momentum is striking. Platforms like BlackRock’s BUIDL Fund, Franklin Templeton’s OnChain U.S. Government Money Fund, and Circle’s integration of tokenized treasuries with stablecoin reserves demonstrate that tokenization has become more than a proof of concept — it’s an evolving market infrastructure.

Critically, tokenized treasuries are not currencies; they are collateral instruments. Yet their yield and safety make them natural complements to stablecoins, which can use tokenized T-bills as backing. The result: an ecosystem where stablecoins provide payments liquidity, tokenized treasuries provide yield, and DeFi protocols combine them into programmable financial instruments.

This convergence signals a broader shift — from speculative crypto to institutional blockchain finance.

IV: Geopolitics of Digital Money

The digital currency race is no longer theoretical. It’s geopolitical.

China’s e-CNY is expanding through Belt and Road digital corridors, enabling cross-border settlement and reducing dependence on the U.S. dollar.

The BRICS bloc — notably Brazil, Russia, India, China, and South Africa — are experimenting with a shared settlement token for energy and commodity trade.

The Gulf states, led by the UAE and Saudi Arabia, are piloting cross-border CBDCs through the mBridge project, exploring oil trade settlement beyond SWIFT.

Meanwhile, Africa is experimenting with CBDCs for financial inclusion, from Nigeria’s eNaira to Ghana’s eCedi, though adoption remains tepid.

The result is a fragmenting monetary order, where competing digital rails may mirror geopolitical blocs. The contest is not just technological — it is a struggle for monetary influence in a multipolar world.

V: Infrastructure, Interoperability, and the Coming Standard War

The next global contest will not be fought over whether money becomes digital — but whose digital money can talk to whose system.

Interoperability frameworks such as SWIFT’s CBDC Bridge, Chainlink’s Cross-Chain Interoperability Protocol (CCIP), and BIS’s Project Icebreaker aim to connect different blockchain networks and CBDC systems. Meanwhile, ISO 20022-compliant blockchain protocols are becoming the lingua franca for financial messaging.

The analogy is instructive: digital currency standards in 2025 are where internet protocols were in 1995 — chaotic, fragmented, and about to consolidate. Whoever sets the dominant interoperability layer will, in effect, own the next generation of global settlement.

VI: The Ethics of Programmability and Surveillance

Programmable money introduces powerful possibilities — and risks.
Governments could automate stimulus, target subsidies, or impose consumption limits. Private issuers could embed smart-contract restrictions that enforce compliance. The line between policy tool and control mechanism is thin.

This raises a broader philosophical tension:

CBDCs maximize control but risk eroding privacy.

Stablecoins maximize flexibility but risk fragility.

Tokenized assets maximize efficiency but rely on market discipline.

The question becomes: how much trust should we encode — and in whom?

VII: The Global South and the Trust Deficit

For emerging markets, the stakes are existential.
CBDCs promise inclusion for the unbanked, but digital literacy, weak institutions, and low trust often blunt adoption. Nigeria’s eNaira has struggled to gain traction; Kenya’s pilot projects are more successful but limited in scope.

Conversely, dollar-denominated stablecoins have found natural adoption in inflation-prone economies like Argentina, Turkey, and Lebanon. For citizens facing volatile local currencies, stablecoins are not speculation — they’re survival. Yet such usage sidelines domestic policy and erodes the local banking base.

The digital divide in money, therefore, is not about access but agency — who gets to define value in the system they use.

VIII: Environmental and Energy Efficiency

As finance digitizes, sustainability enters the ledger.
CBDCs and permissioned blockchains are typically energy-light, while public chains hosting stablecoins and tokenized assets face scrutiny over energy intensity.
Ethereum’s 2022 shift to proof-of-stake mitigated much of this, reducing its energy consumption by over 99%, but ESG-minded institutions still demand green certification for digital assets.

A “digital-green finance” framework is emerging, linking tokenization to carbon accounting and sustainable bond issuance, aligning with the EU’s Green Deal and the IMF’s climate finance agenda.

IX: Integration with DeFi and Capital Markets

The border between DeFi and traditional finance is dissolving.
Tokenized treasuries serve as collateral in DeFi lending, and on-chain repurchase agreements (tokenized repo) are now tested by major banks.
Instant T+0 settlement and 24/7 liquidity are no longer utopian — they are operational prototypes.

This creates a new hybrid system:

CeFi meets DeFi, regulated by code but supervised by compliance.

Real-World Assets (RWA) become the bridge that legitimizes decentralized finance for institutional capital.

The risk? Code errors or liquidity crunches could propagate faster through programmable markets than regulators can react.

X: The Policy Horizon — Regulation, Resilience, and Pluralism

Regulators face a trilemma: encourage innovation, preserve stability, and protect privacy.
A pragmatic approach is pluralism with guardrails — multiple forms of digital money coexisting under clear, enforceable standards.

Key policy moves now taking shape:

The EU advancing legal frameworks for the digital euro and MiCA (Markets in Crypto-Assets).

The U.S. endorsing regulated stablecoins while rejecting a retail CBDC.

The BIS and IMF crafting global guidance for tokenized assets and interoperability.

If successful, this architecture could enable programmable finance without creating an unregulated casino or an overbearing surveillance system.

Conclusion: Trust Is the Real Currency

The CBDC, stablecoin, and tokenized-treasury triad are not binary choices but components of an emerging digital-finance ecosystem.
CBDCs will serve as the public backstop; stablecoins will dominate payments and cross-border liquidity; tokenized treasuries will anchor yield and collateral.

The question that remains is not technical but moral:

Who do we trust to define money — the state, the market, or the algorithm?

In that sense, the future of money is the future of democracy itself.

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