The contest over the future of money is underway, and much of it is playing out behind a handful of technical terms. How people around the world will transact and spend their earnings is being decided right now, and the distinctions between Bitcoin, stablecoins, and central bank digital currencies (CBDCs) are stark — each promises a very different monetary future.

A Familiar Front End, Very Different Machinery

At first glance, all of these forms of digital money look fundamentally alike to the user. A person may open an app on a phone, scan a QR code to pay, and display a QR code of their own so others can send funds. Beneath the surface similarities, however, a world of differences emerges.

A central bank digital currency is issued directly by a country's central bank and represents the domestic currency in digital form. Most countries rely on the commercial banking system to deliver money to the public; a CBDC skips those steps entirely. That may seem convenient, but it also concentrates far more power in the hands of the state and creates potential for abuse. Unlike commercial banks, a central bank has the direct ability to set interest rates and create money. According to the analysis, a world of individually tailored interest rates is not far removed from one in which every transaction is monitored, scored for political compliance, and accounts are handled accordingly.

This is not a purely hypothetical debate. The European Central Bank moved into a preparation phase for a potential digital euro in 2024, China has piloted its e-CNY digital yuan since 2020, and surveys by the Bank for International Settlements have consistently found that the overwhelming majority of the world's central banks are engaged in some form of CBDC research or testing.

Stablecoins sit somewhere in the middle. A stablecoin is issued by a private company, which cannot create money or wield central-bank-level power. Yet stablecoin issuers are still companies, and they can freeze a user's funds if ordered to do so by a government.

Bitcoin and other cryptocurrencies present a different case. The popular idea that Bitcoin is private and cannot be censored is not perfectly true. It does, however, offer the possibility of sending money around the world without any bank or intermediary. That protection does not extend to Bitcoin held on an exchange or in an ETF: coins held with a custodian can be taken away — if, for example, the company custodying the Bitcoin goes bankrupt. Bitcoin held on an exchange is really a sort of banked asset, a paper claim to an underlying asset that should not be confused with actual ownership. That wrapper route became far more accessible in January 2024, when the US Securities and Exchange Commission approved the first spot Bitcoin exchange-traded funds. It is possible that a majority of holders own Bitcoin in such a wrapper rather than as actual self-custodied coins.

Those who do hold Bitcoin in self-custody, by contrast, are no longer dependent on banks or on the network of trust — and possible censorship — that runs today's financial systems. They can also make choices about how they transact, expressing different preferences about what information to keep from public view.

Different Return Profiles and Risk

At the most basic level, a central bank digital currency carries essentially the same value as the underlying national currency. In some countries, a small interest rate may be paid on holdings, making it functionally equivalent to a bank account and a spending tool wrapped into one. Broadly, however, the “return” on a CBDC will likely be close to zero, since it will be largely interchangeable with existing currency equivalents or chequing account balances.

Stablecoins are mostly backed by US dollars, meaning a holder can exchange the token with its issuer — whether Circle, the Tether team, or another issuer — for US dollars or the assets backing it. The two most common stablecoins today are USDC and USDT (Tether). In theory, stablecoins protect holders against inflation and provide a route to US dollar demand even as domestic currencies weaken while the US dollar holds its value. For countries such as China, with capital controls, or Iran, with banking controls and rampant inflation, it can be highly tempting for citizens to hold US dollars physically outside the financial system imposed on them. There is also the possibility that exchanges and services will offer yield of some kind, effectively giving holders access to banking-like returns.

Stablecoins now offer an asset that moves in lockstep with the US dollar, without the need to acquire or physically store cash, and with access to markets that never close. For someone used to a system that allows saving in US dollars, the return profile is the same. But for anyone holding a currency that is rapidly depreciating against the dollar — which describes most currencies in the world — the ability to transact and save in USD could be a godsend. It will not produce a conventional return, but it will spare holders the consequences of inflation.

Bitcoin is the most obvious outlier in terms of return. It is correlated with different assets while being set against the US dollar. Over the longer term — roughly the last dozen years — it has shown an extraordinary return profile, rising from a few US dollars per Bitcoin to more than a hundred thousand dollars per Bitcoin at times. Even in recent years, Bitcoin's return measured against the US dollar has remained strong: in both 2023 and 2024, it was the financial asset with the highest return.

Bitcoin's limited supply creates a dynamic in which a scarcer asset is priced against a more common one that becomes increasingly abundant as barriers to its growth loosen. Its return shows some correlation with the long-term monetary supply growth of the US dollar and other major currencies — as the latter inevitably expands, Bitcoin's value denominated in dollars and a basket of major currencies also grows. Conversely, Bitcoin carries the most risk of the three, as its value can descend quite rapidly against those currencies.

Three Divergent Futures

Most importantly, these different types of digital money imply quite different futures.

Central bank digital currencies aim to grow government capacity as an extension of the current world. They would turn capabilities once considered off-limits for governments — the ability to record an individual's transactions and regulate them at that level — into a question of should or should not, rather than could or could not.

Stablecoins offer a world in which governments around the globe retain some control. They can pursue and freeze funds, but for all intents and purposes issuers remain private companies. In some respects, the model replicates the standard arrangement of a company with a very human chief executive whom governments can approach when they want something. The ground rules for that relationship are being written in real time: the European Union's MiCA framework now subjects stablecoin issuers to licensing and reserve requirements, and in 2025 the United States enacted its first federal stablecoin law.

Bitcoin, among cryptocurrencies, is unique. Unlike the leaders of other crypto projects, Satoshi has disappeared. There is no single individual to appeal to if one wants Bitcoin to do something. Instead, it is a diverse community with many different interests — some economic, some moral — balanced against one another, always leaning in the direction of giving individuals more liberty to do what they wish with their money.

Perhaps it is in Bitcoin that the old dream of a minimal state — one constrained more by the laws of physics than by the arbitrary impositions of man — can see some of its greatest light, though Bitcoin need not overturn nation-states to allow more people, even within a national framework, to carve out their own liberties.

The battle over which monetary future will win is complex, and there may never be an absolute winning configuration. For some time, a mix of cryptocurrencies, stablecoins, and central bank digital currencies will serve in their different ways. How the balance among them evolves will be visible in concrete places — the progress of central bank pilots, the implementation of new stablecoin rules, and the choices users make between custodial convenience and self-custody. Yet looking deep under the hood, it is essential to recognize the differences among these technologies — and the very different futures they imply.

This article is based on a report originally published by Forbes: Bitcoin Vs. Stablecoins Vs. CBDCs: The Fight Over Digital Money.