6 ideas
Money has traditionally bundled three functions: unit of account, medium of exchange, and store of value. Digital technologies let these functions separate, so one instrument can dominate payments while a different asset serves as the store of value. The danger is that central banks can keep control of the unit of account while losing control of the payment rails and stores of value that monetary policy actually works through.
Bitcoin is too slow, too volatile, and too energy-hungry to work as a medium of exchange. Its real legacy is the technology underneath it: decentralized trust and distributed ledgers. Those will transform payments and finance even if the original cryptocurrencies fade or survive only as speculative assets.
Stablecoins get their stability by being backed by reserves of fiat currency or safe assets, which makes them usable for payments in a way volatile cryptocurrencies are not. That stability is borrowed and only as good as the reserves and redemption guarantees behind it. Stablecoins issued by large platforms could still pull payment activity and deposits away from banks and weaken monetary sovereignty.
A retail CBDC gives the public a safe, cheap digital form of central bank money as cash use declines. It also improves financial inclusion and lets policy transmit more directly. But it gives the state a potential record of every transaction, which erodes the anonymity cash provided, and it could drain deposits from commercial banks during a panic.
In Sweden, cash almost disappeared from everyday commerce, which pushed the Riksbank to develop the e-krona so the public would keep access to state-issued money. In China, private giants Alipay and WeChat Pay came to dominate payments, and the People's Bank of China responded partly by piloting the digital renminbi (e-CNY).
They will not easily dethrone the dollar as a reserve currency. Safe-haven status depends on deep, liquid financial markets, rule of law, and institutional trust, and technology alone cannot supply those.