Understanding The Future Of Payments In A Digitalized World

Introduction

The rapid emergence of new payment instruments has prompted renewed questions regarding the nature, origins and design of money in ways not witnessed for decades. Some of these new market participants are competing directly with banks in the payments ecosystem, giving rise to a new shadow monetary system reminiscent of similar developments observed throughout financial history.

Among these innovations, stablecoins – introduced as a class of crypto-assets combining the technological advantages of distributed ledger technology (DLT), including disintermediation, transparency and enhanced security, with the low volatility traditionally associated with sovereign fiat currencies – have recently achieved a remarkable level of adoption while asserting themselves as a new form of private money. In response to the systemic risks posed by the widespread use of privately issued stablecoins, central bank digital currencies (CBDCs) are being developed as a “sovereign digital