Money is undergoing its most significant transformation in decades, as physical cash recedes and privately issued digital instruments proliferate at a pace that existing monetary frameworks were not built to accommodate. The digitalization of money is prompting many jurisdictions to confront the same underlying question: whether and how sovereign money should exist in digital form. Few questions are more pressing for monetary authorities, legislators, and financial regulators today. In this context, central bank digital currencies (“CBDCs”) have emerged as a key area of research and activity across the world: a new form of sovereign money, a direct liability of a central bank, denominated in the national unit of account, and available to the public in digital form.
This trajectory is driven by a convergence of structural forces. Physical cash usage is declining, which risks leaving central bank money increasingly absent from everyday retail payments, along with the public trust the monetary anchor depends on. Financial inclusion is another driver: a CBDC, as risk-free and widely accessible digital money, offers a mechanism for extending payment services to populations that private digital solutions have consistently failed to serve. Privately issued digital money, particularly stablecoins, is also growing rapidly, largely operating outside the banking system without deposit insurance, central bank oversight, or reserve transparency. Lastly, cross-border payment systems remain persistently inefficient, a problem CBDCs could address by making transactions faster and cheaper.
The design of a CBDC carries significant consequences for privacy, financial stability, monetary policy transmission, and market competition. Privacy concerns operate on two levels: the risk that a CBDC could give the issuing authority real-time visibility into individual financial behavior, and the risk that it could be designed to restrict or condition how money is spent. On financial stability, a widely available CBDC represents a direct substitute for commercial bank deposits and, in periods of financial stress, could accelerate deposit flight at a speed and scale that conventional deposit insurance and central bank liquidity facilities may not be designed to address. CBDCs also introduce a structural dependency on digital infrastructure that physical cash does not share. Because they would be accessible to millions of users through a wide array of devices and channels, CBDCs would dramatically expand the attack surface available to malicious actors. A large-scale breach could undermine public confidence with systemic implications well beyond those of a conventional payment system failure. A CBDC would also create a new instrument on the central bank’s balance sheet and a new channel through which monetary conditions could reach households and businesses directly, without passing through the commercial banking system. The magnitude of this effect depends critically on CBDC design, particularly on whether and how it is remunerated. A CBDC built on open standards, meanwhile, has the potential to improve competition in payments through pricing discipline, quality improvements, and broader access. Interest in CBDCs ultimately reflects a growing recognition that payment infrastructure, standards, and instruments are strategic assets of national and supranational sovereignty that states can no longer leave entirely in private or foreign hands.
Within the global CBDC debate, the European Union and the United States, two of the most systemically significant monetary jurisdictions, have arrived at structurally opposite institutional responses. Through a comparative analysis of their frameworks, this paper examines the live and fast-moving legal and policy landscape governing CBDCs in both jurisdictions. It situates the divergence between their approaches within a broader question: how sovereign monetary systems, and the states that stand behind them, will adapt to a rapidly evolving digital economy.
On one hand, the European Union is advancing a digital euro proposal, anchoring the monetary system in a publicly governed infrastructure. The digital euro is conceived as a pan-European public payment instrument, backed by the European Central Bank, universally accepted, and free for basic use. Motivated by the fragmentation of Europe’s payments landscape and its structural dependency on non-European card schemes and mobile payment solutions, the digital euro is designed to strengthen the singleness of the euro in a digitalizing economy, enabling simpler cross-border commerce, greater competition, and new opportunities for businesses and consumers alike. Privacy is preserved through pseudonymization and encryption for online transactions, offline cash-like anonymity, and restrictions on access to individual transaction data. Disintermediation risk is to be managed through holding limits, waterfall mechanisms, and a deliberately non-interest-bearing design, reflecting the primacy that financial stability considerations have assumed in the legislative process now advancing through the EU institutions.
On the other hand, the United States has taken the opposite path by prohibiting the Federal Reserve from issuing a U.S. dollar CBDC, while constructing a federal regulatory framework for privately issued, U.S. dollar-denominated stablecoins in parallel. This reflects a deliberate judgment that the U.S. dollar’s global primacy and the privacy interests of individual users are best protected by the worldwide proliferation of privately issued, federally regulated U.S. dollar instruments extending its reach into digital payments at a scale and speed no CBDC issuance could replicate.
Both jurisdictions invoke monetary sovereignty, financial stability, privacy, and payments innovation as the values their chosen approach is designed to protect; both are responding to similar structural forces, including the decline of cash, the concentration of payment infrastructure in a small number of large platforms, and the geopolitical implications of digital monetary dependency. Yet, they have pursued those shared values, and tackled those challenges, through institutional architectures that are fundamentally opposed.
The comparative analysis in this paper shows that the conventional public-versus-private framing does not map cleanly onto the outcomes each jurisdiction pursues: the European Union’s digital euro is designed to enable private-sector distribution and innovation on top of a publicly anchored ledger, while the United States pairs its rejection of a digital U.S. dollar with a regulated, publicly backstopped private stablecoin regime. The real dividing line is instead where the monetary anchor sits: on the central bank’s balance sheet in the EU model, or on the balance sheets of federally regulated private institutions in the U.S. model.
Unresolved questions remain on both sides of the Atlantic. Legislative passage of the digital euro regulation, once achieved, will mark only the beginning of the challenge. Successful adoption of the digital euro by individuals and businesses will depend on building digital money that works for the real economy: one that is technically sound, legally robust, reliable, secure, and easy to use and integrate. Moreover, whether mandatory distribution obligations will be sufficient to drive genuine digital euro adoption by a banking and financial sector that has raised persistent implementation and disintermediation concerns remains to be seen. Similarly, the U.S. private stablecoin model remains largely untested under conditions of market stress and, at least at this stage, is oriented predominantly toward wholesale, institutional, and crypto-native use cases. Whether stablecoins can become core, everyday consumer retail payment instruments, and serve as a genuine substitute for a public digital-payment channel to citizens in a severe downturn is yet to be confirmed.
The transatlantic divergence carries implications well beyond the two jurisdictions directly examined in this paper. Every G20 economy other than the United States is now exploring a CBDC, and emerging markets are increasingly citing the global proliferation of U.S. dollar-backed stablecoins as a driver of their own CBDC activities. A jurisdiction that delays its own development risks seeing its monetary system progressively marginalized, as citizens organically gravitate toward digital alternatives in its place. For jurisdictions at earlier stages of CBDC development, the EU and U.S. frameworks offer two contrasting design templates. Neither is straightforwardly transferable, given the distinct conditions that produced them, and both will need to be critically assessed and adapted by any jurisdiction that draws on them.
No central bank is developing a CBDC in isolation: multilateral forums, including the Financial Stability Board, the Committee on Payments and Market Infrastructures, and the G20, provide the institutional architecture through which central banks and governments can share experience and coordinate on the cross-border dimensions of CBDC design that no single jurisdiction can resolve unilaterally.
Different as the EU and U.S. paths are, they should not obscure a deeper commonality of purpose that motivates both jurisdictions and speaks equally to others still charting their own course: ensuring that the monetary system continues to function efficiently and that public money retains its role as the anchor of trust and convertibility as the economy digitalizes and private digital instruments proliferate. Whether this goal is best achieved through a CBDC, a regulated private stablecoin framework, or some combination of the two remains genuinely contested. What is certain is that the choices being made today will shape the monetary architecture of the global economy for decades to come.