Layered digital money: the complementary roles of regulated stablecoins and CBDCs

1 Introduction

The digitalisation of money is reshaping the way value is created, stored, and exchanged across modern economies. As established financial infrastructures evolve and distributed ledger technologies gain traction, two increasingly prominent models of digital currency have emerged. One is the central bank digital currency (CBDC), positioned as a sovereign digital analogue of cash. The other is the fiat-backed stablecoin, a privately issued digital token designed to maintain a stable value relative to a sovereign currency. Although popular debate often frames these instruments as competing alternatives, their observed development trajectories suggest that they perform distinct functions and are unlikely to replace one another directly.

For the purposes of this study, the term stablecoin refers specifically to fiat-backed, fully reserved tokens pegged to sovereign currencies. It excludes other forms of price-stable digital assets, such as commodity-backed tokens or algorithmic stablecoins, which differ significantly in design, risk profile, and regulatory treatment.

CBDCs remain primarily driven by public policy considerations, including maintaining monetary sovereignty, improving payment system efficiency, and providing a state-issued alternative to private digital monies. However, these ambitions are constrained by competing design requirements. Retail CBDCs must balance privacy protection, financial stability, and the preservation of the banking sector’s intermediary role. As a result, many central banks have adopted cautious implementation strategies characterised by limited programmability, conservative system architecture, and modest engagement beyond pilot environments.

Stablecoins, by contrast, have followed a markedly different trajectory. Fiat-denominated, fully reserved stablecoins have evolved from experimental instruments into practical tools used in payments, cross-border transfers, and decentralised finance. Regulatory regimes such as the European Union’s Markets in Crypto-Assets Regulation (MiCA) and the United Arab Emirates’ Virtual Asset Regulatory Authority (VARA) framework have established formal structures for their issuance and supervision, aligning them with standards familiar from e-money regulation. In parallel, global payment networks, including Visa and Mastercard, have begun integrating stablecoin-based settlement mechanisms, effectively bridging the gap between crypto-native platforms and established financial rails.

Recent developments in the United Kingdom further reinforce this trend. In early 2026, the Financial Conduct Authority (FCA) published detailed guidance outlining how firms providing cryptoasset services will be authorised and supervised under the forthcoming United Kingdom regulatory regime (FCA, 2026a). In parallel, the FCA has begun testing implementation through its Regulatory Sandbox. In February 2026, four firms were selected to trial stablecoin products under supervisory oversight (FCA, 2026b). Together, these developments indicate that stablecoins are being treated today not merely as experimental digital assets but as components of regulated financial infrastructure.

The broader literature has recognised the complementarity between stablecoins and CBDCs in general terms (Zelmer and Kronick, 2021; Garratt and Shin, 2023). However, a specific gap remains unaddressed: while the theoretical case for complementarity is well established, there is no systematic empirical account of the precise conditions under which this complementarity materialises in practice across different jurisdictions. Furthermore, the literature has not yet produced a consolidated analytical framework that captures how public and private layers of digital money interact with one another within a single coherent architecture. This paper fills that gap by introducing a five-layer digital money architecture and evaluating its propositions against real-world regulatory and market evidence.

A secondary and forward-looking gap also motivates this study. As the digital monetary ecosystem evolves, new instruments—most notably tokenised deposits and tokenised real-world assets—are beginning to occupy adjacent positions within the digital money space. The conditions under which these instruments compete with or complement stablecoins and CBDCs remain insufficiently theorised. While a full treatment of this question lies beyond the scope of the present paper, this study explicitly lays the analytical groundwork for that future research by situating these instruments within the proposed architecture. One significant limitation must be noted: CBDCs and fiat-backed stablecoins do not represent the full extent of the digital asset landscape. Governance tokens, smart contract utility tokens, and speculative crypto assets collectively account for a substantial share of market activity and raise distinct questions about regulation, systemic risk, and adoption dynamics. This paper sets those instruments aside in order to develop and test a focused analytical framework for the two categories most directly implicated in the future of monetary infrastructure. Their treatment, alongside the emerging instruments noted above, forms part of the research agenda set out in Section 7.

Emerging empirical evidence lends support to the layered interpretation. In monetary environments where confidence in national currency has weakened—such as Argentina—stablecoins are already used on a daily basis for value preservation and payments. Conversely, in jurisdictions with strong institutional frameworks, such as the United Arab Emirates, policymakers are deliberately developing both layers in parallel: the Digital Dirham CBDC as public digital cash, and licensed dirham-pegged stablecoins for broader transactional use. Together with the United Kingdom’s sandbox experiments, these developments point to the emergence of a complementary rather than competitive configuration of digital money.

This paper proposes the following:

• A conceptual model of layered digital money that fills the gap in integrated framework-building;
• An analytical foundation for future research on tokenised deposits and real-world assets as emerging instruments within the programmable transaction layer.

These are demonstrated through:

• A comparative analysis of regulatory and infrastructural developments across five jurisdictions;
• Empirical case studies with granular adoption data illustrating early adoption patterns.

These contributions underpin an evaluation of five hypotheses concerning regulatory enablers, payment-system complementarity, macroeconomic demand, CBDC design constraints, and the emergence of sovereign–private coexistence models.

2 Literature review

The rapid emergence of digital currencies has generated a growing body of academic and policy literature examining the economic, technological, and regulatory implications of both stablecoins and central bank digital currencies (CBDCs). Early discussions often framed these instruments as competing monetary innovations; however, more recent research suggests that they may occupy complementary roles within the evolving digital financial system (Zelmer and Kronick, 2021; Garratt and Shin, 2023).

A significant portion of the literature on stablecoins focuses on their potential to improve payment efficiency and reduce frictions in cross-border financial flows. Research conducted at Cornell’s SC Johnson College of Business highlights the growing role of stablecoins in emerging markets, where they are progressively used as mechanisms for wealth preservation and international payments in environments characterised by currency volatility or inflationary pressure (Cornell SC Johnson College of Business, 2025). In such contexts, dollar-denominated stablecoins function as digital substitutes for foreign currency access, allowing individuals and businesses to maintain purchasing power when domestic monetary systems face instability.

Similarly, recent work on digital peer-to-peer financial systems emphasises the role of stablecoins as technological extensions of fiat currency infrastructure. The study Stablecoin DP2P: Innovation and Sustainability in Fiat Currencies argues that fiat-backed stablecoins should not be viewed as separate currencies but rather as digital representations of sovereign monetary units operating within new technological frameworks (Rossi et al., 2025). By combining blockchain-based settlement with fiat reserves, stablecoins offer a hybrid model that preserves price stability while enabling faster and more programmable payment systems.

A broader synthesis of academic research also emphasises the financial and regulatory implications of stablecoins. A comprehensive literature review examining the evolution of stablecoins identifies several major themes: their role in reducing transaction costs in digital payments, their growing integration into decentralised finance ecosystems, and the regulatory challenges associated with ensuring transparency and reserve backing (Liu and Wang, 2025). This body of research suggests that stablecoins have evolved beyond their original use in crypto trading markets and are continuously embedded in broader digital financial infrastructures.

The relationship between stablecoins and CBDCs has also become a central topic of research in monetary economics and financial regulation. Comparative studies suggest that although both instruments represent forms of digital money, they differ fundamentally in governance structures, issuance mechanisms, and policy objectives. Stablecoins are typically privately issued tokens backed by reserve assets, whereas CBDCs represent direct claims on central banks and therefore constitute sovereign digital money (Shen and Wang, 2022). Research comparing global stablecoin initiatives with China’s digital yuan further highlights how these two models represent distinct pathways of digital currency development: privately issued stablecoins prioritise innovation and payment efficiency, while CBDCs primarily reflect policy goals such as monetary sovereignty and financial stability (Shen and Wang, 2022).

More recent literature extends this comparison by introducing tokenised deposits as an additional category of digital money. Garratt and Shin (2023) argue that tokenised deposits—digital representations of commercial bank liabilities issued on distributed ledger infrastructure—raise important questions regarding the ‘singleness of money’ and the interaction between public and private forms of digital currency. This perspective suggests that the evolving monetary ecosystem may consist of multiple interoperable layers rather than a single dominant digital currency model. Critically, Garratt and Shin (2023) argue that stablecoins, as bearer instruments, risk departing from par value and threatening the singleness of money, whereas tokenised deposits settling in central bank money are more conducive to monetary stability—a distinction that raises direct questions about how these instruments should be positioned within a layered monetary architecture. This argument provides direct motivation for the layered architecture proposed in the present study, which explicitly situates both instruments within the programmable transaction layer and sets out the conditions for future comparative analysis.

A growing policy-oriented literature further explores the possibility that these different forms of digital money may coexist within a single monetary architecture. Zelmer and Kronick (2021) argue that stablecoins and CBDCs should be understood as complementary components of a future digital monetary system rather than direct substitutes. In their analysis, CBDCs provide the foundational layer of sovereign digital money necessary to maintain macroeconomic stability, while stablecoins operate as privately issued payment instruments that facilitate technological innovation in retail payments and financial services. However, Zelmer and Kronick do not specify the precise regulatory, infrastructural, or macroeconomic conditions under which this complementarity materialises—a gap this paper addresses directly. Their framework also assumes that adoption is driven by a single set of conditions across jurisdictions, an assumption the market evidence in this paper challenges. As the case studies in Section 5.3 reveal, the conditions that drive stablecoin adoption in Argentina look nothing like those driving it in Singapore, which suggests the field may need a more differentiated account than the complementarity thesis currently provides.

Empirical research on digital currency adoption provides additional insight into the conditions under which these instruments gain practical relevance. Cross-country studies identify a range of drivers, including inflation dynamics, institutional trust, and governance conditions (Rana et al., 2025; Sergio and Wedemeier, 2025). While some research associates crypto adoption with financial development and technological capacity (Magazzino et al., 2025, Gattone and Horky, 2025), other findings emphasise the role of institutional weaknesses and macroeconomic instability in driving usage.

Evidence from emerging markets supports this latter perspective. Studies focusing on Latin America demonstrate that crypto assets—including stablecoins—have become important tools for hedging against inflation and currency depreciation in several economies (Appendino et al., 2023). In these environments, digital assets function not merely as speculative investments but as alternative stores of value and mediums of exchange in response to macroeconomic instability.

Evidence from Argentina illustrates this dynamic particularly clearly. Research on the development of fintech services in Argentina shows that digital financial technologies—including crypto assets—have contributed to expanding financial inclusion by providing access to alternative payment systems and savings mechanisms outside traditional banking structures (Kopp, 2023). In a context characterised by persistent inflation and currency restrictions, stablecoins have become widely used as digital substitutes for foreign currency savings, with peer-to-peer stablecoin trading volumes rising sharply during periods of acute peso depreciation (Pérez and Rodríguez, 2023).

Studies on Nigeria highlight a similar pattern on the role of cryptocurrencies in enabling financial inclusion, cross-border transactions, and access to alternative financial systems in environments with limited banking infrastructure and foreign exchange constraints (Akanji, 2024; Okorie et al., 2023). These findings reinforce the interpretation of digital assets as practical financial tools in economies experiencing institutional and macroeconomic challenges.

Adoption patterns are also reflected in broader global data on cryptocurrency usage. The 2025 Geography of Crypto Report published by Chainalysis demonstrates that retail adoption of crypto assets remains concentrated in emerging markets experiencing currency volatility or limited access to stable financial infrastructure (Chainalysis, 2025). Complementary industry analyses further support this observation, indicating that stablecoins are increasingly used for payments, remittances, and value storage in such environments (TRM Labs, 2025).

Finally, several scholars emphasise the importance of regulatory balance in shaping the future digital monetary system. Research conducted by De Nederlandsche Bank argues that regulators must carefully calibrate policy responses to ensure that innovation in stablecoins and crypto-assets does not undermine financial stability while still allowing technological progress within payment systems (Bolt et al., 2022). Rather than suppressing private digital currencies entirely, the literature advocates for regulatory frameworks capable of integrating stablecoins into supervised financial systems while preserving the central role of sovereign money.

Together the existing literature establishes the theoretical plausibility of a complementary relationship between stablecoins and CBDCs, but leaves two important gaps unaddressed. First, the specific conditions—regulatory clarity, payment infrastructure integration, and macroeconomic context—under which this complementarity actually operates in practice have not been examined systematically across multiple jurisdictions. Second, the position of emerging instruments such as tokenised deposits and tokenised real-world assets within this architecture has not been theorised within an integrated framework. This study addresses both gaps.

3 Research question and hypotheses

3.1 Research question

To what extent are regulated fiat-backed stablecoins a more plausible near-term pathway to widespread digital money adoption than retail central bank digital currencies (CBDCs), and under what specific regulatory, infrastructural, and macroeconomic conditions can the two models coexist within a unified monetary system?

3.2 Hypotheses

The hypotheses below are formulated as contestable empirical propositions. Each identifies a causal relationship that the evidence is used to evaluate. Null formulations are provided to make clear what the evidence would need to show in order to challenge each hypothesis.

• H1 (Payment Infrastructure): Integration with mainstream payment rails is a stronger determinant of stablecoin adoption than sovereign licensing or state backing alone. A regulated private stablecoin integrated into existing payment infrastructure will achieve measurably higher transactional adoption than a state-issued CBDC operating in the same jurisdiction without equivalent infrastructure integration. The null hypothesis holds that sovereign backing and legal tender status are sufficient to achieve comparable adoption levels to privately issued stablecoins integrated into mainstream payment networks.
• H2 (Regulatory Clarity): Regulatory clarity is a necessary condition for the institutional deployment and adoption of stablecoins. In jurisdictions where regulatory frameworks are absent or ambiguous, stablecoin activity remains confined to retail and informal use cases regardless of market demand. The null hypothesis holds that regulatory ambiguity does not prevent institutional adoption where market demand is sufficiently strong.
• H3 (Macroeconomic Conditions): In environments characterised by inflation above 20% annually and restricted foreign exchange access, stablecoins will achieve measurably higher transactional adoption than CBDCs issued in the same jurisdiction. The null hypothesis holds that CBDCs, given sufficient state backing, can achieve comparable or better adoption levels in such environments.
• H4 (CBDC Design Constraints): Retail CBDC design constraints—specifically limited programmability and restricted third-party integration—are theorised to materially reduce their competitiveness relative to stablecoins as user-facing payment instruments. This proposition is advanced on theoretical grounds and its full empirical evaluation requires systematic comparative data across CBDC implementations that is not yet available at the required granularity. The null hypothesis holds that these design differences are not reflected in increased adoption differentials at the retail level.
• H5 (Layered Coexistence): Jurisdictions that deliberately develop CBDCs and licensed stablecoins in parallel demonstrate a functional separation between the two instruments in practice, with CBDCs used for settlement-layer activity and stablecoins for transaction-layer activity. The null hypothesis holds that in such jurisdictions no functional differentiation emerges and the instruments compete for the same use cases.

4 Conceptual framework: layered digital money architecture

The rapid evolution of digital monetary technologies suggests that the future financial system is unlikely to be dominated by a single form of digital currency. Instead, the emerging architecture of digital money appears layered, with different instruments and actors performing specialised roles within a broader financial ecosystem.

This study proposes a five-layered digital money architecture, structured to reflect both institutional hierarchy and functional interaction. At the top sits the policy layer, which shapes the regulatory environment within which digital money operates. This is followed by the sovereign settlement layer, where central banks provide comparatively risk-free public money. Beneath this, private sector activity emerges through the infrastructure layer, enabling connectivity between traditional finance and digital assets. The programmable transaction layer builds on this infrastructure by introducing user-facing digital money instruments—comprising stablecoins as the primary current instrument, alongside tokenised deposits and tokenised real-world assets as emerging instruments whose inclusion is anticipated in the near term. Finally, the market layer reflects patterns of real-world adoption shaped by both macroeconomic conditions and institutional environments as illustrated in Figure 1.

The layered architecture is not merely descriptive but analytically productive in two respects. First, it makes testable predictions: if the layers are genuinely distinct, CBDCs and stablecoins should exhibit different use patterns even when deployed in the same jurisdiction. Second, it provides a principled basis for locating emerging instruments—such as tokenised deposits—within the overall structure, rather than treating them as anomalies. This dimension aims to build a model that accommodates blockchain-native instruments and locates them in a broader financial system, where Central Banks, public and private sectors coexist.

For the layered structure to be challenged, one would need to observe CBDCs achieving material retail transactional adoption at scale in jurisdictions where stablecoins are simultaneously present, or stablecoins being deployed primarily as wholesale settlement instruments—either of which would suggest the functional separation the framework predicts does not hold in practice.

The architecture set out here is deliberately bounded. The five layers are designed to capture the institutional and functional relationships between CBDCs and regulated stablecoins; they do not model the full range of macroeconomic or geopolitical conditions that shape demand for either instrument. The evidence examined in this paper points clearly to the existence of such conditions: currency instability drives retail stablecoin adoption in Argentina and Nigeria, while the Digital Dirham’s development reflects sovereign monetary strategy as much as payment efficiency. At a wider level, the international dimension of CBDC development—including initiatives associated with BRICS-aligned economies, efforts by certain states to reduce dependence on dollar-denominated settlement infrastructure, and the political economy of monetary sovereignty more broadly—constitutes a material driver of CBDC adoption that the proposed framework does not formally incorporate. The same applies, in different forms, to the structural features of the global dollar system that underpin stablecoin demand. These dimensions are important for a complete account of digital money adoption; their systematic treatment is left for future research.

It is worth clarifying how this architecture relates to existing classifications of digital money. The BIS money flower and the public-private money framework advanced by Adrian and Mancini-Griffoli (2021) classify money along axes of issuer type, form, accessibility, and transfer mechanism—they are primarily taxonomic tools that describe what money is. The five-layer architecture proposed here operates on a different axis. It is a functional-institutional model designed to explain how different instruments interact within a regulatory and market ecosystem, and to generate predictions about where adoption differentials are likely to emerge and why. Where existing taxonomies ask what category an instrument belongs to, this framework asks how it functions within an institutional hierarchy and under what conditions it achieves adoption at different layers. The incremental analytical value lies in this predictive and policy-relevant orientation rather than in classification.

4.1 The regulatory policy layer

At the foundation of the layered digital money architecture lies the policy layer, which defines the legal and institutional conditions under which digital monetary systems can operate. While technological infrastructure and market demand shape functionality, regulatory clarity ultimately determines whether digital assets can integrate into the broader financial system.

Stablecoins, in particular, rely on licensing regimes, reserve requirements, and supervisory standards to interact with banks, payment networks, and financial institutions (Zelmer and Kronick, 2021). Jurisdictions that provide clear regulatory frameworks tend to exhibit more structured and sustainable digital asset development across both public and private sectors.

Several major jurisdictions have introduced dedicated regulatory regimes. The European Union’s Markets in Crypto-Assets Regulation (MiCA) establishes a harmonised framework across member states, defining categories such as asset-referenced tokens and e-money tokens and imposing requirements on issuance, reserve backing, and governance (ESMA, 2024). The United Arab Emirates has adopted a similarly comprehensive approach through the Virtual Asset Regulatory Authority (VARA), which provides licensing pathways and operational rules for digital asset activities, including fiat-referenced virtual assets (VARA, 2024).

In the United Kingdom, the Financial Conduct Authority (FCA) has published detailed guidance for cryptoasset firms and is testing stablecoin services through its Regulatory Sandbox, combining structured regulation with controlled experimentation (FCA, 2026a; FCA, 2026b). In the United States, the GENIUS Act seeks to establish a federal framework for stablecoin oversight, focusing on reserve backing, consumer protection, and prudential regulation (U.S. Congress, 2025).

In Asia, the Monetary Authority of Singapore (MAS) has developed a structured regulatory approach through its digital token guidance and 2023 stablecoin framework, supporting innovation while maintaining supervisory oversight (Monetary Authority of Singapore, 2022; Monetary Authority of Singapore, 2023). At the global level, the FATF Travel Rule further reinforces this layer by requiring digital asset service providers to verify and share counterparty information, strengthening AML/CFT compliance across jurisdictions.

Although innovation in digital assets often precedes regulation, the evidence examined throughout this study suggests that clear and enforceable regulatory frameworks are a key enabler of adoption, supporting institutional participation and integration into existing financial systems.

4.2 The sovereign settlement layer (CBDCs)

Central banks occupy a structurally different position from every other actor in this architecture. Their liabilities are comparatively risk-free by definition—the sovereign settlement layer is not just another tier, it is the anchor that gives every other layer its credibility.

The primary function of this layer is to provide settlement-grade infrastructure for digital transactions. CBDCs are designed to ensure monetary sovereignty, financial stability, and efficient settlement within the financial system. As a result, their design prioritises resilience, regulatory compliance, and systemic stability over extensive programmability or retail innovation.

Examples of this layer can be observed in projects such as China’s digital yuan (e-CNY), which operates through a two-tier system involving central bank issuance and commercial bank distribution (Shen and Wang, 2022), and the UAE’s Digital Dirham, which is being developed alongside regulated private digital assets.

Other initiatives, including Singapore’s Project Guardian and Project Bloom, and Australia’s Project Acacia, further emphasise the role of CBDCs in wholesale and infrastructure-level applications rather than as direct retail payment competitors (MAS, 2025; Reserve Bank of Australia, 2025).

However, relatively few CBDC initiatives have achieved widespread adoption. Nigeria’s eNaira illustrates the challenges of implementing sovereign digital currencies in environments where user incentives are limited and trust in public institutions may be constrained (International Monetary Fund, 2023).

4.3 The infrastructure layer (payment and blockchain rails)

The third layer represents the technical and financial infrastructure that connects digital currencies with existing financial systems. This includes global payment networks, acquiring banks, payment processors, and specialised blockchain infrastructure providers.

Traditional payment networks such as Visa and Mastercard have recently integrated stablecoin settlement capabilities, enabling transactions to be processed using blockchain-based assets while maintaining compatibility with existing financial systems (Visa, 2025a; Visa, 2025b; Mastercard, 2025; Forbes, 2026).

In parallel, dedicated infrastructure providers such as Paxos facilitate the issuance, custody, and settlement of stablecoins within regulated environments. Through partnerships with institutions such as PayPal, Paxos enables the deployment of stablecoins like PYUSD, demonstrating how infrastructure providers serve as a bridge between blockchain technology and traditional finance (Paxos, 2026).

This layer is therefore critical in enabling interoperability, ensuring that digital assets can be integrated into established payment and financial systems rather than operating in isolation.

4.4 The programmable transaction layer (digital money instruments)

This is where most of the commercial action currently happens, and where the architecture is most likely to change. Stablecoins dominate this layer today, but tokenised deposits from JPMorgan and Citi are already launched with institutional counterparties.

This layer is currently dominated by fiat-backed stablecoins, which function as digital representations of sovereign currencies and enable programmable payments, cross-border transfers, and integration with decentralised financial applications. Their combination of price stability and programmability makes them particularly suited for retail payments and digital financial services.

However, this layer is not static. Two additional categories of instrument are rapidly approaching operational relevance and are expected to occupy positions within this layer alongside stablecoins in the near term. First, tokenised deposits—on-chain representations of commercial bank liabilities—are already being piloted by institutions such as JPMorgan (Kinexys) and Citi (Token Services), and are beginning to attract dedicated regulatory attention. Second, tokenised real-world assets (RWAs)—digitised claims on underlying financial assets, commodities, or instruments—are recognised within regulatory frameworks under labels such as asset-referenced tokens (ARTs) under MiCA, asset-referenced virtual assets (ARVAs) under VARA, and tokenised capital market products (CPMs) under MAS frameworks.

The inclusion of these instruments within this layer has significant implications. While stablecoins and tokenised deposits may appear functionally similar in certain payment use cases, they differ materially in their risk profiles, counterparty structures, and regulatory treatment. Stablecoins are issued by non-bank or specialised entities against segregated reserves; tokenised deposits remain part of the commercial bank balance sheet and carry different liquidity and default risk characteristics (Garratt and Shin, 2023; Fireblocks, 2025). These distinctions mean that the programmable transaction layer is likely to become a site of both competition and complementarity between instruments, with the regulatory treatment of each determining which use cases each instrument occupies. The architecture proposed in this paper explicitly accommodates this multi-instrument future and provides the conceptual foundation for the comparative analysis of these instruments that future research must address.

4.5 The market layer (user adoption)

The final layer reflects real-world adoption patterns, shaped by macroeconomic conditions, institutional environments, and user incentives.

Evidence suggests that digital asset adoption varies significantly across regions. In economies experiencing inflation, currency volatility, or restricted access to foreign exchange—such as Argentina and Nigeria—stablecoins are frequently used as tools for value preservation and cross-border payments (Appendino et al., 2023; Chainalysis, 2025). On the contrary, in more stable financial environments, digital assets are more commonly used as investment or financial instruments, with less emphasis on everyday transactional use.

These patterns indicate that macroeconomic conditions and institutional trust are key determinants of adoption, reinforcing the importance of both the policy layer and the broader economic context in shaping the role of digital money.

It is unquestionable that decentralised cryptocurrencies such as Bitcoin and Ethereum play a significant role in the broader digital asset ecosystem even gaining legal status in El Salvador (Wall Street Journal, 2021). However, the focus of this study remains on forms of digital money directly linked to fiat currency—either through sovereign issuance (CBDCs) or reserve backing (stablecoins)—as these are most relevant to the proposed layered architecture.

5 Methodology

5.1 Regulatory comparison

The central question about whether regulatory clarity actually drives adoption—rather than merely correlating with it—requires looking across jurisdictions rather than within one. Five frameworks were selected: MiCA, VARA, the FCA regime, the GENIUS Act, and the MAS framework.

The analysis focuses on five regulatory frameworks representing major global approaches to the regulation of stablecoins and digital asset payment systems: the European Union’s Markets in Crypto-Assets Regulation (MiCA), the Virtual Asset Regulatory Authority (VARA) rulebooks in the United Arab Emirates, the United Kingdom’s forthcoming Financial Conduct Authority (FCA) cryptoasset regime, the United States GENIUS Act, and the Monetary Authority of Singapore (MAS) Guide to Digital Token Offerings. These frameworks were selected because they explicitly address stablecoin issuance or digital tokens functioning as fiat-referenced payment instruments.

It should be noted that the regulatory guidebooks and rulebooks analysed in this section focus exclusively on privately issued digital assets, including stablecoins and other fiat-referenced tokens. Central bank digital currencies (CBDCs) are not addressed within these regulatory frameworks, as CBDCs are issued directly by central banks and governed through monetary policy frameworks, payment system legislation, and central bank policy initiatives rather than through licensing regimes for private issuers.

At the time of writing, three of these frameworks are already in force: MiCA in the European Union, the VARA regulatory rulebooks in the United Arab Emirates, and Singapore’s regulatory framework administered by the Monetary Authority of Singapore. Two additional frameworks remain under active development. In the United States, the GENIUS Act has enacted a federal framework governing stablecoin issuance, reserve requirements, and supervisory oversight though full implementation remains ongoing (U.S. Congress, 2025). In the United Kingdom, the FCA is developing a comprehensive regulatory regime for cryptoasset activities; full enforcement is scheduled to begin on 25 October 2027 (FCA, 2026a).

To ensure a systematic comparison across jurisdictions, the regulatory frameworks are evaluated according to a consistent set of parameters reflecting the key institutional characteristics governing the issuance and operation of stablecoins. These parameters were selected based on recurring regulatory principles identified across existing stablecoin legislation, supervisory rulebooks, and industry analyses (Table 1).

TABLE 1. Selected regulatory frameworks relevant to stablecoins and digital money.

Among the operational regimes, VARA offers the most detailed rulebook across the selected parameters, while upcoming frameworks such as those in the United Kingdom and the United States may further refine these approaches as regulatory practice and industry maturity continue to develop.

To move beyond qualitative description and provide a basis for comparing regulatory clarity across jurisdictions, the nine parameters in Table 2 are scored on a simple ordinal scale in Table 3. Each parameter is assigned 0 where the relevant provision is absent or unaddressed; 1 where it is referenced or recommended within the framework but not yet fully defined or enforceable; and 2 where it is explicitly defined, fully addressed, and currently in force. The scores for each jurisdiction are derived from the primary legal and regulatory sources already cited in this study: Regulation (EU) 2023/1,114 for MiCA, the VARA Rulebooks (VARA, 2024) for the UAE, FCA guidance and sandbox documentation (FCA, 2026a; FCA, 2026b) for the United Kingdom, the GENIUS Act (U.S. Congress, 2025) for the United States, and the MAS stablecoin framework and consumer protection guidelines (MAS, 2023; MAS, 2024) for Singapore. The principal judgment calls arise in provisions scored as 1, which applies most notably to the FCA regime across reserve backing, transparency, custody, and redemption parameters, and to the GENIUS Act across custody and redemption, reflecting the incomplete implementation status of both frameworks. The resulting scores should be read as a time-stamped snapshot reflecting the regulatory position at the time of writing rather than a static or definitive measure. The jurisdiction ordering at the extremes—VARA and MAS at the upper end, FCA at the lower end—is robust to any reasonable variation in parameter weighting given the magnitude of the score differences. The mid-range positions of MiCA and the GENIUS Act are more sensitive to weighting assumptions. It is acknowledged that equal weighting across parameters is a simplifying assumption, and that future research should apply independent coding and sensitivity analysis to refine this framework.

TABLE 2. Comparative regulatory treatment of stablecoins across selected jurisdictions.

TABLE 3. Scored comparative regulatory treatment of stablecoins across selected jurisdictions.

Bold row indicates total score across all nine parameters.

5.2 Industry case studies

To complement the regulatory comparison, this study examines industry case studies that illustrate how stablecoins are being integrated into existing financial infrastructure. Three cases are analysed: Visa’s implementation of USDC settlement, Mastercard’s development of stablecoin-based payout infrastructure, and Circle’s regulatory alignment strategy as the issuer of USDC.

5.2.1 Visa: stablecoin settlement infrastructure

Visa represents one of the earliest large-scale payment networks to experiment with stablecoin settlement. The company began piloting settlement using Circle’s USD Coin (USDC) and has progressively expanded these capabilities across its global payments infrastructure. Through this system, selected partners—including banks and fintech institutions—are able to settle obligations to Visa using USDC rather than relying exclusively on traditional fiat settlement channels (Visa, 2025a).

The scale of this integration has grown materially. Visa has reported processing over $225 million in USDC settlement transactions across its expanded network (Visa, 2025b). The infrastructure now supports multiple stablecoins and blockchain networks, enabling financial institutions to settle VisaNet obligations using blockchain-based digital dollars on a near-continuous basis, beyond traditional batch clearing cycles. This settlement capability is available across more than 30 settlement currencies and has been adopted by issuing banks in markets including the United States, Europe, and Asia Pacific (Visa, 2025c).

These developments demonstrate how stablecoins can operate as settlement instruments within global payment infrastructure, functioning as an additional settlement layer within the existing financial architecture rather than replacing established card payment systems.

5.2.2 Mastercard: stablecoin payout infrastructure

Mastercard has pursued a complementary strategy centred on stablecoin-based payout networks. Its collaboration with Thunes, a global cross-border payments infrastructure provider, enables financial institutions and payment service providers to send funds receivable directly in stablecoin wallets through Mastercard Move, a global money-transfer network spanning more than 200 markets (Mastercard, 2025).

Mastercard has reported that cross-border payment flows supported by stablecoin rails have grown significantly, with transaction volumes in its stablecoin payout corridors increasing year-on-year as more receiving institutions enable wallet-based payouts (Forbes, 2026). This infrastructure expands the functional role of stablecoins within international payment systems, particularly in corridors where settlement speed and access to traditional banking are constrained.

Industry developments indicate that major financial institutions view stablecoins as an extension of existing payment infrastructure, with partnerships between payment networks, fintech firms, and digital asset platforms enabling stablecoins to be used alongside traditional currencies within global payment ecosystems (CNBC, 2025).

5.2.3 Circle: regulatory alignment and institutional issuance

Circle, the issuer of USD Coin (USDC), has actively pursued regulatory compliance and transparency standards across multiple jurisdictions, positioning USDC as a regulated digital dollar capable of operating within institutional financial systems. USDC has grown to become one of the largest stablecoins by market capitalisation, with circulation exceeding $43 billion as of mid-2025 and monthly on-chain transfer volumes consistently above $350 billion (Circle, 2025).

Circle has expanded its regulatory presence across key financial hubs. In Singapore, its subsidiary Circle Internet Singapore Pte. Ltd. Obtained a Major Payment Institution (MPI) licence from the Monetary Authority of Singapore, enabling the company to provide digital payment token services and cross-border transfer services to institutional clients (Circle, 2023). In the United Arab Emirates, Circle secured a Financial Services Permission licence from the Financial Services Regulatory Authority of Abu Dhabi Global Market (ADGM), allowing the firm to expand payment and settlement services involving USDC across the region (Circle, 2025).

These regulatory approvals illustrate how stablecoin issuers increasingly seek multi-jurisdictional authorisation to support global payment infrastructure and institutional adoption, positioning digital fiat tokens as components of regulated payment systems rather than purely crypto-native instruments.

5.2.4 Merchant adoption and payment integration

Beyond payment networks and stablecoin issuers, adoption among merchants and payment platforms further demonstrates the growing usability of blockchain-based payment systems. Payment service providers such as Stripe have introduced stablecoin payment capabilities that allow businesses to accept digital asset payments within existing e-commerce platforms. In partnership with Shopify, Stripe has begun enabling merchants to accept stablecoin payments through integrated payment tools designed for online retail environments (Stripe, 2025a).

Stripe has reported that stablecoin payment volumes on its platform grew substantially following its integration with Shopify, with merchant participation concentrated in markets where dollar-denominated settlement offers a practical advantage over local currency volatility (Stripe, 2025b). These developments build upon broader experimentation with digital asset payments across major global platforms and illustrate the gradual integration of blockchain-based payments into mainstream commercial infrastructure.

Together these industry cases illustrate how stablecoins are steadily incorporated into mainstream financial infrastructure through collaborations between payment networks, financial institutions, technology platforms, and regulated stablecoin issuers.

5.3 Market case studies

To complement the regulatory and industry analysis, this section examines selected market environments to observe how macroeconomic conditions and institutional factors influence the practical use of digital assets. This study adopts two primary variables: inflation dynamics and institutional trust. While corruption is not used as a standalone metric, it is incorporated within the broader concept of institutional trust, which reflects governance quality, regulatory consistency, and public confidence in financial systems.

Two subsets of jurisdictions are examined. Argentina and Nigeria represent economies characterised by higher inflation rates, currency volatility, and varying degrees of institutional distrust or policy inconsistency. In contrast, the United Arab Emirates and Singapore represent jurisdictions with relatively low inflation, strong institutional frameworks, and established regulatory approaches to digital assets. Inflation data is drawn from the International Monetary Fund (IMF) datasets (IMF, 2025).

5.3.1 Argentina

Argentina represents a compelling case of adoption driven by persistent inflation and capital controls. Annual consumer price inflation exceeded 211% in 2023 and remained above 150% through 2024, making peso-denominated savings functionally untenable for most households and businesses (IMF, 2025). Limited access to foreign currency and ongoing currency depreciation have led individuals and businesses to use dollar-denominated stablecoins as digital substitutes for U.S. dollar holdings.

Peer-to-peer stablecoin trading volumes in Argentina rose sharply during the 2023 currency crisis, with USDT peer-to-peer volumes on platforms such as Binance P2P and LocalBitcoins reaching multi-year highs as users sought to circumvent capital controls (Pérez and Rodríguez, 2023). According to Chainalysis (2025), Argentina ranked among the top ten countries globally for raw crypto transaction volume during 2024, with stablecoins accounting for the majority of retail-level activity. A survey conducted by the Americas Market Intelligence consultancy found that approximately 53% of Argentine adults had purchased digital currencies in 2022, particularly stablecoins, while 46% cite it as an instrument against inflation and payments rather than speculative purposes (Americas Market Intelligence, 2023).

In this context, stablecoins function primarily as tools for value preservation and cross-border payments outside the domestic financial system (Appendino et al., 2023; Pérez and Rodríguez, 2023). No CBDC is operational in Argentina, and central bank digital currency programmes have not advanced materially in the country during the study period.

5.3.2 Nigeria

Nigeria illustrates a similar pattern of adoption driven by currency instability and foreign exchange constraints. The Naira depreciated by over 70% against the U.S. dollar between 2023 and 2024, and annual inflation exceeded 30% for much of the period (International Monetary Fund, 2025). Despite the introduction of the eNaira CBDC in October 2021, uptake has remained limited. IMF estimated that the eNaira had been downloaded approximately 800,000 times by late 2022 but that active wallets represented a fraction of total downloads, reflecting low engagement and limited merchant acceptance (International Monetary Fund, 2023).

In comparison, cryptocurrency and stablecoin usage has continued to grow. Chainalysis ranked Nigeria fifth globally in its 2025 Crypto Global Adoption Index, with peer-to-peer stablecoin trading volumes among the highest on the African continent. Stablecoin usage is concentrated in remittance flows and dollar-savings applications: according to TRM Labs (2025), approximately 60% of Nigeria’s stablecoin transaction volume is associated with cross-border transfers, reflecting both the scale of the Nigerian diaspora and the high cost of conventional remittance channels.

Additional studies reinforce this trend, highlighting the role of blockchain and cryptocurrencies in supporting financial inclusion, cross-border payments, and access to alternative financial systems in Nigeria (Akanji, 2024; Okorie et al., 2023). These findings support the interpretation of stablecoins as practical financial tools in environments characterised by macroeconomic instability and institutional constraints—and clearly indicate that the eNaira has not served as an effective substitute.

5.3.3 United Arab Emirates

The United Arab Emirates represents a regulatory-driven model of digital asset adoption within a low-inflation, high-trust institutional environment. Annual inflation remained below 3% throughout the study period, and institutional trust in the financial system is comparatively high, as reflected in the UAE’s performance on World Bank worldwide governance indicators (World Bank, 2024). The establishment of VARA in 2022 marked a significant step in formalising digital asset regulation.

According to Chainalysis (2025), the UAE received over $56 billion in crypto transaction value between 2024 and 2025, representing 33% year-over-year growth, with particularly strong expansion in retail merchant activity. The UAE Central Bank reported that pilot transactions for the Digital Dirham CBDC were conducted with the Ministry of Finance in 2024, marking the first recorded government payment using sovereign digital currency infrastructure (Ministry of Finance UAE, 2025). The number of VARA-licensed virtual asset service providers exceeded 600 by early 2025, indicating the maturation of the private digital asset sector alongside CBDC development (VARA, 2025).

This dual development of regulated private digital assets and sovereign digital currency infrastructure reflects a structured, layered approach to digital money—with stablecoins and CBDCs performing demonstrably different functions across transaction and settlement use cases respectively.

5.3.4 Singapore

Singapore represents a comparable case of regulatory-led digital asset development in a stable macroeconomic environment. The Monetary Authority of Singapore finalised its stablecoin regulatory framework in 2023, alongside ongoing initiatives in tokenisation and digital financial infrastructure (MAS, 2023). Annual inflation peaked at approximately 6% in 2023 before declining, and institutional trust remains among the highest in Asia.

Singapore’s Project Guardian, which involves major financial institutions including DBS Bank, JPMorgan, and Standard Chartered, has conducted live tokenisation transactions in foreign exchange and government bond markets, with total notional value across Project Guardian pilots reported at over SGD 1 billion by 2025 (MAS, 2025). The MAS has licensed more than 80 digital payment token service providers under its payment services framework, including stablecoin issuers, as of early 2025 (MAS, 2024).

These cases illustrate two distinct but complementary drivers of digital asset adoption. In inflation-affected economies such as Argentina and Nigeria, stablecoins function primarily as tools for value preservation and cross-border payments. On the other hand, jurisdictions such as the United Arab Emirates and Singapore demonstrate how regulatory clarity, institutional trust, and structured policy frameworks can support the development and integration of digital asset markets within formal financial systems.

6 Results

This section evaluates the five hypotheses outlined in Section 3 by synthesising evidence from the regulatory comparison, industry case studies, and market analysis. The findings collectively support the emergence of a layered digital money architecture, in which stablecoins and CBDCs perform distinct but complementary roles.

6.1 Payment infrastructure and stablecoin adoption (H1)

Visa’s USDC settlement network, Mastercard’s stablecoin payout infrastructure, and the Stripe-Shopify integration all represent cases where adoption and transaction volumes increased materially following infrastructure integration rather than regulatory licensing alone.

The counterfactual is instructive: the eNaira in Nigeria is a fully licensed sovereign instrument with active government support, yet it has achieved minimal transactional adoption. USDT and USDC, by contrast, have achieved substantial peer-to-peer volumes in the same market by virtue of their integration with accessible digital rails and existing user behaviours. This contrast is consistent with H1 and suggests that H2 (regulatory clarity) and H1 (infrastructure integration) are best understood as complementary conditions rather than competing, with each addressing a different dimension of adoption.

It should be noted that this comparison involves a naira-denominated CBDC set against predominantly dollar-denominated stablecoins. H1 is designed to distinguish public versus private backing and infrastructure integration as determinants of adoption rather than denomination effects; however, the extent to which currency substitution independently drives the adoption differential cannot be fully disentangled from the available evidence and is acknowledged as a limitation of this comparison.

Given that this single within-jurisdiction contrast varies denomination, inflation exposure, issuer identity, institutional context, network accessibility, and instrument design simultaneously, no causal weight is claimed. The contrast is presented as illustrative of a plausible association between infrastructure integration and adoption outcomes rather than as a controlled test of causation.

6.2 Regulatory clarity as an enabler of adoption (H2)

The regulatory clarity index introduced in Section 5.1 provides a basis for ordering jurisdictions by the completeness of their stablecoin frameworks. VARA, MAS, and MiCA score at the upper end of the index and correspond to the jurisdictions where institutional stablecoin activity—licensed service providers, payment network integrations, and tokenisation pilots—is most developed. The GENIUS Act scores in the mid-range, reflecting its enacted status alongside incomplete implementation, with institutional activity in the United States remaining in transition. The FCA regime scores lower, consistent with its sandbox-stage status and the absence of full enforcement until 2027. Argentina and Nigeria fall outside the index entirely, as neither jurisdiction has established a formal regulatory framework against which the nine parameters could be assessed. Were they to be scored, both would approach zero across all dimensions—and neither shows any institutional stablecoin adoption, despite both leading retail adoption globally.

This pattern is consistent with H2: the rank order of regulatory clarity broadly corresponds to the rank order of institutional stablecoin activity across jurisdictions. Jurisdictions with clearly defined and enforceable frameworks have established the legal and operational conditions necessary for stablecoin issuance, payment network integration, and institutional use. Where those conditions are absent or incomplete, stablecoin activity remains confined to retail and informal channels regardless of market demand.

The evidence does, however, point to an important qualification. Regulatory clarity is a necessary condition for institutional adoption but does not determine retail adoption, which follows a different logic entirely. In Singapore and the UAE, regulated stablecoin markets have developed primarily within institutional and payment-professional segments. In Argentina and Nigeria, retail adoption has reached world-leading levels with no formal regulatory framework in place, driven instead by macroeconomic conditions. These two pathways are not interchangeable, and the null hypothesis—that regulatory ambiguity does not prevent institutional adoption where market demand is sufficiently strong—is not borne out by the available evidence.

6.3 Macroeconomic conditions and stablecoin usage (H3)

Nigeria provides the most direct test of H3, as it is the only jurisdiction among the high-inflation cases examined where a CBDC and stablecoins coexist in the same market. With the Naira depreciating by over 70% against the U.S. dollar between 2023 and 2024, and annual inflation exceeding 30% for much of the period, the conditions satisfy the macroeconomic threshold set out in H3. Despite the introduction of the eNaira in October 2021, uptake has remained limited: the eNaira was downloaded approximately 800,000 times by late 2022, with active wallets representing a fraction of total downloads. This stands in clear contrast to Nigeria’s top-five global ranking for stablecoin adoption, with peer-to-peer stablecoin volumes among the highest on the African continent.

Argentina reinforces the macroeconomic dimension of the analysis, though it cannot serve as a direct test of H3 given the absence of an operational CBDC. With annual consumer price inflation exceeding 211% in 2023 and remaining above 150% through 2024, and approximately 53% of Argentine adults having purchased digital currencies—predominantly stablecoins—stablecoin adoption reached world-leading levels driven entirely by macroeconomic necessity rather than regulatory enablement. The absence of a CBDC alternative means Argentina cannot speak to the comparative adoption question H3 poses, but it does confirm that severe macroeconomic instability generates strong retail stablecoin demand independently of any institutional or regulatory framework.

Taken together, the evidence is not consistent with the null hypothesis—that CBDCs, given sufficient state backing, can achieve comparable adoption levels in high-inflation environments. The eNaira’s experience demonstrates that institutional endorsement does not translate into adoption when users’ primary need is access to a stable and trusted unit of account, which a depreciating sovereign currency cannot provide regardless of its digital form.

It is further acknowledged that the Nigeria comparison cannot cleanly separate the effects of denomination from those of infrastructure integration and issuer structure. The demand for dollar-denominated stablecoins in high-inflation environments reflects currency substitution as much as a preference for privately issued or better-integrated instruments. A cleaner test of H3 would require a local currency stablecoin operating alongside a CBDC in the same jurisdiction under comparable macroeconomic conditions—a comparison that the current empirical landscape does not yet support.

6.4 Design constraints of retail CBDCs (H4)

CBDC initiatives are primarily shaped by policy considerations, including financial stability, privacy, and the preservation of the banking system. These constraints have led to conservative design choices, including limited programmability and restricted third-party integration compared to private digital assets.

Evidence from ongoing CBDC projects—such as the e-CNY, Digital Dirham, and various wholesale CBDC experiments—suggests that central banks prioritise settlement efficiency and system resilience rather than retail-level innovation. The Digital Dirham’s use in government payments and the e-CNY’s primary deployment through commercial bank distribution channels both illustrate a pattern in which CBDCs are gravitating toward settlement and infrastructure functions rather than competing as programmable retail instruments. The limited adoption of retail CBDCs in practice further reinforces this conclusion.

It is acknowledged that this section does not directly measure programmability, third-party integration capacity, or retail adoption differentials at the instrument level. H4 is therefore best understood as a theoretically derived design proposition whose full empirical evaluation remains a priority for future research.

6.5 Emergence of a layered digital money model (H5)

As established, UAE provides the clearest empirical example: the simultaneous development of the Digital Dirham for government and interbank settlement and the licensing of fiat-referenced stablecoins under VARA for retail and commercial transactions demonstrates a deliberate functional separation. Pilot data from the Ministry of Finance shows Digital Dirham activity concentrated in government payment flows, while VARA-licensed stablecoin activity is concentrated in peer-to-peer and merchant payments—consistent with the predicted layered structure.

Singapore’s Project Guardian further reinforces this pattern, with tokenised assets and stablecoins used in wholesale financial market transactions while retail payment applications remain a separate and distinct development track. Across these cases, a consistent pattern emerges: CBDCs function as sovereign, settlement-grade infrastructure; stablecoins operate as programmable, user-facing payment instruments; and infrastructure providers connect these tiers within regulated financial systems. The null hypothesis—that no functional differentiation emerges in jurisdictions developing both instruments in parallel—is not borne out by the available evidence.

7 Future work: towards a multi-instrument programmable layer

This study establishes that the future of digital money is layered, with stablecoins and CBDCs performing distinct and complementary roles across the programmable transaction and sovereign settlement layers respectively. However, the analysis has intentionally maintained a primary focus on these two dominant instruments in order to develop and test the core framework. The evidence examined in this paper points clearly to a more complex future that warrants systematic investigation.

The most pressing priority for future research is a rigorous comparative analysis of stablecoins and tokenised deposits within the programmable transaction tier. As Section 4.4 establishes, both instruments are already operational and beginning to serve overlapping use cases. Tokenised deposit initiatives such as JPMorgan’s Kinexys Digital Payments platform (JPMorgan, 2025) and Citi’s Token Services (CitiBank, 2024) are processing live transactions with institutional counterparties, and the instruments are attracting dedicated regulatory attention within frameworks that also govern stablecoins. Despite this convergence, the literature has not yet produced a systematic account of how these instruments compete or complement one another at the level of specific use cases.

The analytical framework developed in this paper provides a principled starting point for that research. Within the layered architecture, the relevant comparison is not simply stablecoins versus tokenised deposits in the abstract, but rather which instrument is better suited to which sub-function within the programmable transaction tier: retail payments, treasury management, cross-border settlement, or decentralised financial applications. Several dimensions of this comparison are likely to be decisive. First, the risk profile of each instrument differs materially: stablecoins carry issuer and reserve risk but are structurally isolated from bank balance sheets, whereas tokenised deposits carry commercial bank counterparty risk but benefit from deposit insurance in many jurisdictions (Garratt and Shin, 2023; Fireblocks, 2025). Second, the regulatory treatment of each instrument varies across jurisdictions, creating potential for regulatory arbitrage as issuers and users choose between instruments partly on the basis of supervisory burden. Third, the interoperability of each instrument with existing financial infrastructure and with CBDCs at the settlement layer will significantly influence which instrument becomes dominant for institutional applications.

A second dimension of future research concerns tokenised real-world assets (RWAs) and their interaction with the broader layered architecture. As regulatory frameworks already accommodate tokenised RWAs—under MiCA’s ART category, VARA’s ARVA classification, and MAS’s tokenised capital market product guidance—these instruments are beginning to serve as collateral and settlement assets within digital financial markets. Their integration into the programmable transaction layer introduces new questions about liquidity, pricing, and systemic interconnection that the present framework does not fully address.

A third priority is longitudinal empirical research on adoption trajectories. The market evidence examined in this paper is largely cross-sectional and relies substantially on industry-reported data, which is expected for a developing technology that still carves its way through. However, future studies should exploit panel datasets—drawing on central bank statistics, regulated reporting under established regulatory frameworks, and blockchain analytics—to track how the functional separation between CBDCs and stablecoins evolves over time and whether the layered architecture proposed here remains stable as new instruments enter the programmable transaction layer.

A fourth priority concerns the evidential base for testing the relationship between macroeconomic conditions and CBDC adoption. The present paper relies substantially on Nigeria as the primary same-jurisdiction comparison case, given that it is the only high-inflation market examined where both a CBDC and significant stablecoin activity coexist. Whilst Nigeria provides a striking illustration of the dynamics described in H1 and H3, this reliance on a single case limits the generalisability of the findings. Future research should identify and examine additional jurisdictions where a retail CBDC and material stablecoin adoption coexist. The Bahamas, where the Sand Dollar has been operational since 2020 yet has struggled to achieve meaningful circulation, represents a candidate case that could provide a useful comparative basis independent of acute macroeconomic instability (Central Bank of the Bahamas, 2023). Brazil, where the Drex CBDC project has evolved significantly and a real-pegged stablecoin is emerging to serve adjacent functions, offers a further case in which the boundary between public and private digital money is actively being renegotiated (Crypto for Innovation, 2026). A properly specified study of such cases, drawing on transaction-level data and using statistical methods rather than qualitative comparison, would significantly strengthen the empirical foundations of the layered architecture proposed here.

A related priority is the separation of denomination effects from infrastructure and issuer structure effects in the adoption differential observed in high-inflation markets. The UAE, where the dirham-backed DDSC stablecoin received regulatory approval in February 2026 alongside the Digital Dirham CBDC rollout, represents the most promising near-term candidate for such an analysis once sufficient transaction data becomes available (IHC, Sirius and FAB, 2026). The United Kingdom’s tGBP offers a comparable opportunity in a stable macroeconomic environment. Research drawing on these cases would allow the currency substitution and infrastructure integration mechanisms identified in this paper to be meaningfully disentangled.

Finally, the interaction between the tiers themselves deserves closer investigation. This paper treats the five layers as functionally distinct, but the boundaries between them may become more permeable as technology and regulation evolve. In particular, the question of whether CBDC infrastructure could eventually serve as the settlement substrate for tokenised deposits and stablecoins—effectively integrating the sovereign settlement and programmable transaction layers—has significant implications for monetary policy, financial stability, and the competitive dynamics of the digital money ecosystem.

In summary, the layered digital money architecture proposed in this paper is designed to be extensible. Its value lies not only in organising the current landscape of stablecoins and CBDCs but in providing a conceptual structure within which emerging instruments can be located, compared, and evaluated. Future research should build on this foundation to examine the multi-instrument programmable transaction layer in the depth its practical significance now demands.

8 Conclusion

This study set out to fill a specific gap in the digital money literature: while the complementarity between stablecoins and CBDCs has been noted in prior work, no systematic account existed of the precise regulatory, infrastructural, and macroeconomic conditions under which this complementarity materialises in practice across different jurisdictions. The paper addressed this gap through a five-layer digital money architecture, evaluated against regulatory comparisons, industry case studies, and granular market evidence.

The findings suggest that stablecoins currently demonstrate stronger practical adoption, particularly in payment systems, cross-border transactions, and in environments characterised by macroeconomic instability. Their programmability, interoperability, and integration with existing financial infrastructure position them as effective user-facing instruments within the evolving digital economy. The granular evidence from Argentina and Nigeria makes this clearest: where domestic monetary systems have failed to provide stable value, stablecoin adoption has emerged not as a technological preference but as a rational economic response—one that CBDC programmes in comparable environments have been unable to replicate.

At the same time, the analysis shows that CBDCs fulfil a fundamentally different role. Rather than competing directly with stablecoins, CBDCs are more appropriately understood as sovereign settlement-layer infrastructure, designed to support monetary stability, regulatory oversight, and system resilience. The UAE provides the strongest empirical illustration of this functional separation operating by design, with pilot data showing Digital Dirham activity concentrated in government payment flows and licensed stablecoin activity concentrated in retail and commercial applications.

Looking back at what the paper actually delivered relative to what it set out to do, four things stand out. First, it identifies the specific conditions—regulatory clarity, payment infrastructure integration, and the presence of macroeconomic distress—that jointly determine where within the layered architecture each instrument is likely to achieve adoption. Second, it demonstrates empirically that these conditions operate differently for institutional and retail adoption, requiring a more differentiated account than prior complementarity arguments have provided. Third, it sharpens the hypothesis structure of the field by formulating contestable propositions with explicit null formulations, several of which are clearly not borne out by the available evidence. Fourth, it establishes the analytical groundwork for future research on tokenised deposits and tokenised real-world assets as emerging instruments within the programmable transaction layer.

The policy implications of this model are significant. Regulators are not required to choose between stablecoins and CBDCs; rather, they must design frameworks that enable their coexistence while managing associated risks. Jurisdictions that provide clear, consistent, and enforceable regulatory environments appear better positioned to foster both innovation and financial stability within digital asset markets. The experience of jurisdictions that have moved beyond exploration to implementation—the UAE, Singapore, and now the UK—suggests that the question is no longer whether stablecoins and CBDCs can coexist, but how the terms of their coexistence should be structured.

Finally, the study acknowledges that the digital monetary ecosystem continues to evolve. The programmable transaction layer, currently dominated by fiat-backed stablecoins, is likely to become a multi-instrument environment encompassing tokenised deposits and tokenised real-world assets. The framework proposed in this paper is explicitly designed to accommodate this evolution: its layered structure provides a stable analytical reference point against which new instruments can be located and evaluated as they achieve operational relevance.

In conclusion, while stablecoins currently lead in terms of adoption and practical use, the long-term trajectory of digital money is best understood as hybrid, multi-pillar, and institutionally embedded. The contribution of this paper is to specify, with greater precision than prior work, the conditions under which this layered future is likely to emerge—and to identify the research agenda that must now be pursued to understand its full dimensions. What was not expected going into this study was how different the adoption pictures would look across the four market cases. Argentina and Nigeria showed that retail stablecoin usage can reach world-leading levels with no formal regulatory framework in place, while Singapore showed that a mature regulatory environment produces almost entirely institutional adoption. That both of these belong to the same broader phenomenon—the spread of fiat-pegged digital money—suggests the field has been working with a more unified model of adoption than the evidence supports.

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Footnotes

Edited by: Xiao Fan Liu, City University of Hong Kong, Hong Kong SAR, China

Reviewed by: Nenad Tomić, University of Kragujevac, Serbia

Steven Gordon, Babson College, United States

Vidhu Shekhar, SP Jain Institute of Management & Research, India