The framing that pits stablecoins against central bank digital currencies as competing visions for the future of money is analytically convenient and mostly wrong. The two instruments are pursuing different use cases, attracting different users, and solving different problems. The competition, where it exists, is narrower than the rhetoric suggests.

Stablecoins — primarily USDT and USDC, which together account for the vast majority of the market — are settlement instruments for crypto-native activity. They allow traders to move between positions without exiting to fiat. They allow DeFi protocols to denominate loans and yields in dollar terms. They allow cross-border transactions to settle without the correspondent banking rails that add cost and latency to international payments. These are real functions. They are also functions that a retail CBDC, constrained by privacy concerns, programmability limits, and central bank conservatism, is not well positioned to perform.