Digital money in 2025: diverging models, converging stakes

Written by Alex Bausch, Chair of 2 Tokens

The world is entering a new era of monetary infrastructure. From Washington to Brussels to Beijing, governments and central banks are rewriting the rules of money - digitally. Whilst each power pursues a distinct path, one thing is clear: digital currencies are no longer theoretical. They are real, politically charged and increasingly critical to global finance.

By mid-2025, the global approach to digital money has split into three distinct tracks. In the US, policymakers have formally rejected a Federal Reserve-issued CBDC, opting instead to back fully regulated, private-sector stablecoins tied to the dollar. This shift has given clarity to markets and momentum to firms such as Circle and JPMorgan. Europe is taking a slower, state-led route: the ECB is pushing ahead with its digital euro, but progress is mired in legislative delays and design disagreements. MiCA, the EU’s sweeping crypto regulation, is being phased-in as a strict framework for digital assets, though key details are still under debate. Meanwhile, China is rapidly scaling its state-run e-CNY across borders through initiatives such as mBridge whereby positioning it as a pillar of a multi-currency global system. These contrasting strategies are now reshaping the foundations of global payment infrastructure - and setting the stage for a more fragmented, politically driven digital money landscape.

Source: CoinGecko “State of Stablecoins: 2024”. Analysis informed by Ledger Insights.

At the heart of Europe’s exploration lies the European Central Bank’s (ECB) groundbreaking work on distributed ledger technology (DLT) for wholesale settlement. Between May and November 2024, the ECB and Eurosystem coordinated 64 market participants across nine countries in a series of real-world trials and simulations. Over €1.6 billion in central bank money was settled using DLT infrastructure, marking a significant milestone. Three distinct interoperability models were tested:

1. trigger solution - a bridge between DLT systems and the TARGET2 RTGS system, led by Deutsche Bundesbank.

2. DL3S (full DLT interoperability) - central bank money held directly on a Eurosystem-run DLT platform (Banque de France).

3. TIPS hash-link - DLTs interfacing with a TIPS-like system via APIs (Banca d’Italia).

So, the findings? DLT is not merely viable for settlement - it holds potential across the full value chain, including fund subscriptions, repo, interbank reconciliation and cross-border payments. Participants used actual central bank money in TARGET2 under strict control, reinforcing the technology’s readiness for institutional finance.

A fragmented race for global digital dominance

These technical advances in Europe come against a backdrop of diverging global strategies in digital currency. The US, EU and China have adopted sharply different models, creating a fragmented digital money landscape with profound consequences for investors, FinTech and financial institutions. The US has embraced regulated private stablecoins while explicitly banning a Federal Reserve-issued CBDC under President Trump. The GENIUS Act (2025) mandates that stablecoins be 100% backed by cash or Treasuries and imposes strict audit rules. This has bolstered programs such as USDC and JPMorgan’s JUSDC, reinforcing the US dollar’s dominance while potentially channeling trillions into U.S. debt markets. Europe, in contrast, is prioritising public-sector control. The digital euro, still in development, faces delays and caps to prevent disintermediation of banks. At the same time, MiCA - the EU’s new crypto regulation - requires that euro-denominated stablecoins be issued only by licensed banks or e-money firms, backed with up to 60% of reserves held in EU bank deposits. This conservative stance protects sovereignty but limits innovation and yield. John Orchard and Katie-Ann Wilson at the Digital Monetary Institute at OMFIF wrote recently: “According to a senior official at the Commission however, the ECB appears to be projecting the traditional bank run experience onto the very different context of stablecoins. Bank runs occur due to fractional reserve lending, but stablecoins, especially those governed under MiCAR, are fully collateralised. The reserves exist precisely to ensure that holders can be made whole at any time. Fears of a large-scale redemption may be largely irrational in a system where assets are matched 1:1 and highly liquid. The author of MiCAR has also said that multi-issuance was always intended to be allowed – possibly to ensure that the Europe does not, in the words of two key officials, become a ‘flyover zone’ and get left behind on DLT innovation.” Meanwhile, China has pushed ahead with the e-CNY, its central bank digital currency, through cross-border pilots such as mBridge. Though private stablecoins are banned domestically, China promotes the e-CNY for trade settlement and financial diplomacy across Belt and Road corridors. Analysts see this as a strategic move to reduce global dependency on the dollar, even if RMB convertibility remains limited.

Source:Teamblockchain

A patchwork future: friction or innovation?

As these models evolve, global finance faces a fork in the road. Will these systems interoperate, or will they fragment into regional digital blocs? The ECB’s exploratory work on DLT provides a glimpse into a possible middle path: a controlled but interoperable architecture that balances innovation with public oversight. However, unless digital euros and euro-based stablecoins can operate flexibly across borders and private rails, Europe risks falling behind. Meanwhile, the US is charging ahead with private-led innovation, offering regulatory clarity and yield incentives for stablecoin adoption. For now, dollar-backed tokens dominate the global stablecoin market, comprising over 80% of total volume. But Asian experimentation - with China’s CBDC and Hong Kong’s regulated stablecoin regime - could gradually diversify global liquidity flows.

What it means for investors

In the US, the combination of full reserve stablecoins and rising Treasury demand creates a clear investment narrative: yield + safety. In the EU, MiCA adds compliance certainty but caps growth potential. Euro stablecoins remain niche. In China and Asia, state-led systems offer geopolitical alignment and settlement efficiency but stifle private sector opportunity. The ECB’s tests show that DLT-based settlement in central bank money is technically feasible and institutionally appealing. But adoption at scale will depend on policy clarity, cross-border integration and interoperability between public and private solutions.

Conclusion: the code, the rules and the power

As the cash era fades, the battle over digital money is not just about technology - it is about who sets the rules. The US is outsourcing innovation to the private sector, the EU is doubling down on financial sovereignty, and China is exporting its monetary model. What the ECB’s work makes clear is this: tokenisation alone is not enough. Without a harmonised framework and flexible architecture, digital currencies risk deepening fragmentation rather than solving it; the next few months are pivotal. With legislation advancing in Europe, regulatory certainty strengthening in the US, and geopolitical tests for the Yuan underway, investors must watch not only where capital flows, but how money itself is being redefined.