Stablecoin vs. CBDC: Who is Positioned to Win?

CBDC’s or Central Bank Digital Currencies are a looming threat to the existence of their private counterparts, the stablecoins. The stronger governments like China and Japan have realized that people now want a borderless financial world and they want to put their money at a place that can provide maximum yields. Thus, embracing and adopting public blockchains and DeFi solutions by governments is inevitable. For this very reason, if you plan to go for stable coin development, it should offer strong differentiation to the CBDC opponent.

But before we establish the differentiating factors let us look at why do crypto traders rely on stablecoins:

Price stability
One of the biggest advantages of holding stablecoins is that during token development, it is designed to be backed by a national currency like US Dollar, Euro, or physical assets like gold or oil. Thus, stablecoins offer a kind of stability to the highly volatile crypto market. That is why most of the DeFi lending platforms prefer stablecoins as collateral deposits.

• No Central intervention or middlemen challenges
Stable coin development is done on the distributed ledger technology (DLT). For example, TrueUSD is a USD-backed ERC20 stablecoin, which means it is built on the Ethereum blockchain. Developed on the blockchain, it eliminates the need for banks or central bodies to keep issues like double spending and manipulation in check.

• Remittance
The use of blockchain in stablecoins makes them a suitable asset for enabling a borderless financial system. The stablecoins attract lower transaction fees and shorter transfer times, making global financial inclusion possible.

• Smart contracts programmability
Stablecoins can be custom programmed to meet the needs of the users. For example, a stablecoin can be used to transfer USD value or gold value or it can be designed to be used as branded stablecoins. This is where the loyalty programs find a use for them.

Central bank digital currencies (CBDCs)

Central banks are trying their hands at DLTs to issue central bank digital currencies. That’s because stablecoins have proved that there exists a lot of opportunities in the space. While these do pose a threat to the popularity of stablecoins, the fact is that stablecoins have an edge over CBDCs.

1) CBDCs will still have a middle man
The CBDC will be issued by the central bank. As a result, the banks will always have some kind of control over the CBDCs. On the contrary, the decentralized stablecoin offered by bodies like Maker Decentralized Autonomous Organization (or MakerDAO) is emblematic of the fact that the stablecoins can be driven by the community for the benefit of all.

2) Limited use
It is believed the CBDC will be used mostly for transactions between financial institutions within a country whereas private stablecoins like USDT, TrueUSD can be used as a general-purpose currency across borders.

3) CBDC’s will always be fiat-backed
It’s a fact that governments will ensure their CBDC’s are always backed by fiat currency. The fiat is prone to manipulation like quantitative easing which will impact the price of CBCD, thus exposing it to the same kind of socio-economic effect.
However, stablecoins can be backed by real-world assets like gold, oil, and more. This will ensure the stablecoin users can doge the impact of inflation in fiat economies.

To wrap

The main advantages of stable coin development are steady value, margin trading opportunities, value stability, and censorship resistance. At Antier Solutions, we enable the development of secure, efficient, and trustless stablecoins backed by fiat currency or any commodity. Right from the ideation to the final product, our team of 150+ blockchain developers ensures top-notch development.

Schedule a free demo of one of our stable coin development projects or connect with our subject matter experts to share your business needs.