[Stablecoins Report] The Development of CBDCs Worldwide and in Vietnam – Part 4
Amid the rapid development of stablecoins and cryptocurrencies, many countries have begun researching, piloting, or deploying Central Bank Digital Currencies (CBDCs) to maintain the central bank’s dominant role in the monetary system. About CBDCs – Central Bank-Issued Digital Currency Central Bank Digital Currency (CBDC), often referred to as the digital money of the central bank, is a new form of central bank-issued legal tender in digital form. CBDCs use national units of account and are backed by central bank reserves. They are officially recognized and legitimized by central banks. CBDCs are introduced with the following objectives: Depending on their economic, technological, and financial conditions and strategies, countries have adopted different CBDC deployment models. The three main models are: Global CBDC Deployment According to the latest 2024 data from the Atlantic Council, 134 countries—representing 98% of global GDP—are exploring CBDC issuance, a fourfold increase from just 35 countries in May 2020. Among them, 66 countries have entered the development, pilot, or launch phases. Additionally, a BIS survey of 25 developed economies and 56 emerging/developing economies (covering 76% of the world’s population and 94% of global GDP) shows that over 90% of central banks are researching CBDCs, 62% have begun technical trials, and 26% are conducting pilot programs. Below are some notable countries that have piloted or implemented CBDCs: Bahamas Bahamas was the first country to officially launch a CBDC, the Sand Dollar, in October 2020, following pilots in the Exuma and Abaco islands in 2019. The Sand Dollar aims to improve financial inclusion, especially in remote areas where traditional banking services are inaccessible. The system uses Distributed Ledger Technology (DLT) developed by NZIA, a DLT and blockchain solution provider based in the Bahamas. It includes features like offline payments and transaction limits for lower-tier accounts to enhance security. After a hurricane in 2019, the Sand Dollar was deployed in Abaco to support economic recovery, highlighting the role of CBDCs in financial stability during crises. However, its adoption faces challenges due to uneven technological infrastructure and limited public acceptance. Nigeria Nigeria was the first African country to launch a CBDC, the eNaira, in October 2021. Although it aims to enhance financial inclusion and reduce transaction costs, eNaira adoption has been low—according to the IMF, by 2023, 98.5% of eNaira wallets had never been used. Key barriers include weak infrastructure, lack of public trust, limited product understanding, and competition from cash, mobile wallets, and cryptocurrencies. Despite this, the circulation of eNaira grew from 2.55 billion to 12.53 billion naira (around USD 8 million) by early 2024. The Central Bank of Nigeria (CBN) has started partnering with tech firms like Gluwa to improve infrastructure and plans to reassess its rollout strategy in 2025 to boost practical use. China China leads one of the largest-scale CBDC deployments with the e-CNY (digital yuan). Since 2020, e-CNY has been piloted in over 20 major cities and integrated into popular apps like WeChat and Alipay. A standout feature is offline payments, allowing transactions without internet access—crucial in remote areas. China uses a hybrid technological architecture, applying DLT only where beneficial. The country is also testing cross-border CBDC payments via the mBridge project with Thailand, the UAE, and Hong Kong. e-CNY is now accepted in retail stores and used for salaries and government benefits. However, as of May 2024, its cumulative transaction volume reached USD 910 billion—still modest compared to China’s total payment market of USD 40.3 trillion. Public concerns about surveillance have slowed widespread adoption, highlighting the need for privacy protections when implementing CBDCs. India The Reserve Bank of India (RBI) began piloting its retail digital rupee in four cities in late 2022. As of now, the rCBDC program has about 5 million users and has integrated standard QR codes for interoperability with other payment methods. Efforts are underway to introduce key features, including trials for usage in rural and remote areas. CBDCs are seen as tools for instant payments, reduced cash printing costs, and improved cash flow transparency and management. However, concerns remain over privacy, cybersecurity, and the impact on commercial banking systems. CBDC in Vietnam Vietnam has not issued a CBDC yet but has shown clear strategic interest. Since 2017, the Vietnamese government has introduced measures to manage the growing use of digital currencies through various regulations on digital assets, virtual currencies, and digital money. This effort has continued to evolve. In 2021, Decision No. 942/QĐ-TTg by the Prime Minister approved the strategy for developing e-government toward digital government, assigning the State Bank of Vietnam (SBV) to research and pilot CBDC from 2021 to 2023. In 2023, Resolution No. 50/NQ-CP emphasized the development of fintech, including blockchain and digital currency applications. SBV has formed dedicated research teams and collaborated with international organizations to explore suitable CBDC models. At the 5th Annual Meeting of the 7th Term of the Vietnam Banks Association on March 27, 2025, SBV Deputy Governor Pham Tien Dung announced Vietnam’s upcoming pilot of a digital asset trading platform. He emphasized the banking sector’s key role in protecting consumers, settling transactions, and ensuring the stability of stablecoin values. Additionally, the Ministry of Finance has submitted a draft resolution on piloting digital asset issuance and trading to the government. The plan includes coordination with the Ministry of Public Security and SBV to both foster market development and mitigate risks to financial security and monetary stability. According to Decree 94/2025/NĐ-CP on the regulatory sandbox for the banking sector, from July 1, 2025, the government will allow testing of new fintech-based financial products and services, including credit scoring, Open API data sharing, and peer-to-peer lending. These trial results will help regulators finalize a legal framework for fintech in Vietnam. This is a promising sign, paving the way for financial technology and digital currency development. CBDCs are an inevitable step in the global trend toward monetary digitalization. As seen in the case studies, there is no one-size-fits-all model for CBDCs. Each country must tailor its approach based on its specific economic and monetary conditions. While Vietnam has not yet issued a CBDC,
[Stablecoins Report] Risks, Challenges and Legal Framework of Stablecoins in Vietnam and Worldwide – Part 3
Stablecoins have emerged to reshape the way people transact, ushering in an era of digital finance that is fast and flexible. Alongside these benefits come risks and challenges that individuals and institutions alike must navigate—prompting countries around the world to quickly establish and refine legal frameworks to manage and develop this domain. Risks and Challenges of Stablecoins Despite their advantages, stablecoins carry significant risks and challenges for both users and the broader financial system. De-pegging and depreciation risks Although designed to maintain stability, stablecoins can lose their peg to reference values under certain conditions. This could be due to user panic and mass sell-offs, falling value of reserve assets (for crypto-backed types), or failure of operational algorithms (for algorithmic types). A notable example is the collapse of TerraUSD (UST) in May 2022. UST, an algorithmic stablecoin pegged to the USD via a mint/burn mechanism using the LUNA token, once reached a market cap of $18 billion. When confidence wavered, UST quickly lost its peg and crashed to nearly zero—causing tens of billions of dollars in investor losses. The “death spiral” not only destroyed UST/LUNA but also triggered a domino effect that led to the collapse of related funds and projects. Other stablecoins have also experienced de-pegging: Iron Finance’s IRON lost its value in 2021, USDT has temporarily dropped to $0.95 during market panic, and USDC fell to ~$0.88 in March 2023 due to reserve concerns before recovering. These incidents show that stablecoins are not “absolutely stable”—if reserve mechanisms are weak or unexpected events occur, stablecoins may crash in value, potentially resulting in total losses for investors. Risks in transparency and reserve assets For centralized (fiat-backed) stablecoins, trust in the issuer and reserves is paramount. A lack of transparency or failure to prove adequate reserves raises doubts. Tether (USDT) exemplifies this. For years, Tether faced criticism for not publishing independent audits, leading to concerns that USDT might not be fully backed by USD. Though Tether has since improved transparency (quarterly reserve reports) and claimed to hold ~$72.5 billion in U.S. Treasury bonds (as of Q2 2023), skepticism persists until a full audit is released. The quality of reserve assets is another issue: if reserves are invested in high-risk instruments (e.g., long-term bonds, low-quality commercial paper), market volatility can devalue reserves, threatening 1:1 redemption. Even reputable stablecoins like USDC were affected when ~$3.3 billion in reserves held at Silicon Valley Bank were frozen during its collapse—causing USDC to temporarily de-peg to ~$0.9. These cases highlight the necessity of high-quality, liquid reserves (cash or T-bills) to prevent systemic risk. As one expert said: “To avoid systemic risk, stablecoin reserves must be extremely safe and liquid.” Major events related to Stablecoins (2022–2023): Overall, the stablecoin market has undergone a “trust test”—well-reserved and transparent projects (like USDC) remained resilient, while weak or opaque ones were eliminated. Risks to the traditional financial system The rapid growth of stablecoins has raised concerns among regulators about systemic impacts. Large stablecoins like USDT and USDC hold massive reserves—Tether’s ~$72B in U.S. Treasuries is equivalent to a mid-sized bank or a major money market fund. A sudden stablecoin redemption wave (bank-run scenario) could force issuers to liquidate reserves, impacting money markets and traditional banking. Experts liken this to a looming “bank-run ghost” in crypto—without control, a widespread redemption event could destabilize both crypto and broader financial markets. Moreover, as private money issued outside central banks, stablecoins could divert deposits from commercial banks, weakening monetary policy tools and reducing banks’ lending capacity. A New York Fed report compares stablecoins to money market funds (MMFs): both aim to maintain a $1 value, but while MMFs are tightly regulated, stablecoins are not—posing potentially higher risks. There’s also concern that stablecoins may circumvent capital controls and AML/CFT regulations, allowing “hot money” to flow across borders unchecked. These concerns explain why regulators are on high alert and are pushing for stronger supervision frameworks to prevent systemic risks. In short, stablecoins are not risk-free. Users must understand each stablecoin’s mechanisms and credibility. Regulators must balance risk control (reserves, transparency, crime prevention) with innovation, as stablecoins can also benefit digital finance if properly managed. Legal landscape for Stablecoins in various countries Stablecoins straddle the line between currency and digital assets, prompting governments to explore legal frameworks. While approaches differ by country, the trend is toward increased oversight, ensuring reserves and reducing systemic risks. United States The U.S. has no unified federal law for stablecoins, resulting in fragmented regulation. The SEC considers some stablecoins securities, while the CFTC focuses on commodity-linked stablecoins (e.g., gold-backed). In 2021, the President’s Working Group on Financial Markets recommended regulating stablecoins like bank deposits. By 2023, draft federal legislation emerged (from the House Financial Services Committee) to set reserve and oversight requirements, but has not passed yet. Meanwhile, some states have acted: European Union (EU) The EU is a pioneer in digital asset regulation via the MiCA (Markets in Crypto-Assets) framework, adopted in 2023 and effective from 2024. MiCA categorizes stablecoins as: Requirements include: Oversight is shared between national regulators, ESMA (European Securities and Markets Authority), and the ECB for large stablecoins. MiCA limits the scale of non-euro stablecoins—if daily transactions exceed €200 million, usage may be restricted, preventing dominance by USD-backed coins. The EU aims to stabilize the stablecoin market and protect the euro. Major issuers like Circle are preparing to register under MiCA to continue operations in Europe. Singapore Singapore adopts a proactive, conditional approach to stablecoins. In 2022, the Monetary Authority of Singapore (MAS) stated that digital asset innovation is welcome—but not crypto speculation. Stablecoins, if well-regulated, could serve alongside CBDCs and tokenized bank deposits. In Aug 2023, MAS issued a regulatory framework for single-currency stablecoins (SCS) pegged to SGD or G10 currencies, issued in Singapore. Requirements include: Three entities (including Paxos and Circle via StraitsX) have received in-principle approval to issue compliant stablecoins—Singapore’s regulatory “sandbox” encourages innovation while ensuring safety. China China takes a strict stance on cryptocurrencies, including stablecoins. It has banned crypto trading, mining, and ICOs
[Stablecoins Report] Stablecoins and CBDCs: Definitions and Objectives – Part 2
Stablecoins and Central Bank Digital Currencies (CBDCs) are widely regarded as powerful instruments for advancing traditional financial systems. They promise to usher in a more inclusive, efficient, and cost-effective global financial landscape. 1. Understanding Stablecoins and CBDCs Both stablecoins and CBDCs are forms of digital currency with stable values typically pegged to fiat money. However, they differ significantly in terms of issuing authorities, governance mechanisms, and several other key aspects: • Issuing Authorities Stablecoins are issued by private entities or decentralized organizations (e.g., Tether, Circle, MakerDAO), whereas CBDCs are issued directly by a country’s central bank. In essence, CBDCs represent state-backed digital versions of national currencies, while stablecoins function as “private money” governed by corporations or communities. • Collateral and Value Assurance CBDCs are recognized as legal tender in some countries, backed by the “full faith and credit” of the government, ensuring their value and usability. In contrast, stablecoins rely on collateral assets or algorithmic mechanisms promised by the issuers. Their value assurance is tied to the issuer’s credibility and reserves, without any governmental guarantee—introducing credit risks not present in CBDCs, which are virtually risk-free like cash. • Technology and Distribution Stablecoins are inherently built on distributed ledger technology (DLT), most commonly blockchain. Users manage stablecoins via personal digital wallets and engage in peer-to-peer transactions over the internet. Conversely, CBDCs are typically developed using centralized ledger technologies. Distribution models vary by country and include: While CBDCs can adopt DLT, they usually employ private versions where the central bank or authorized parties retain control—unlike the open, permissionless nature of public blockchains. • Transparency and Privacy Stablecoin transactions on public blockchains are highly transparent—every transaction is recorded and can be traced using blockchain explorers. However, user anonymity is relatively preserved since wallet addresses aren’t directly linked to real-world identities. CBDCs, on the other hand, are designed with more stringent oversight. Central banks can often access detailed user transaction data (e.g., China’s PBoC can trace all e-CNY transactions). Privacy levels vary by country, but full anonymity—like with cash—is generally avoided due to concerns about financial crime. • Integration with Financial Systems CBDCs integrate seamlessly into national financial systems and monetary policy frameworks. Central banks can regulate the supply of CBDCs and set policies like usage limits or interest rates. Stablecoins operate independently of these systems, and central banks can only influence their supply indirectly through regulation. This independence has raised concerns among regulators who see unregulated stablecoins as potential threats to monetary policy and systemic stability. Nevertheless, with proper regulation, stablecoins and CBDCs can coexist and complement each other. As Singapore’s stance suggests: “Stablecoins can be useful alongside CBDCs if risks are well-managed.” 2. Objectives of CBDCs and Stablecoins Enhancing Payments and Transactions In several countries, both CBDCs and stablecoins are already being used for everyday payments and peer-to-peer (P2P) transfers. Stablecoins offer low-cost, near-instant transactions, enabling users to make payments, shop, or send money directly without going through banks. In China, the e-CNY has been piloted in over 20 major cities including Shenzhen, Beijing, and Shanghai… Citizens can use digital wallets for offline purchases, subway rides, and bill payments. e-CNY is also integrated with popular payment platforms like WeChat Pay and Alipay, boosting accessibility and convenience. Expanding Financial Inclusion In countries with underdeveloped banking systems, stablecoins offer a viable alternative for value exchange, ensuring that transactions can occur even without access to banking services. Digital currencies drive innovation in both technology and economic models, acting as catalysts for digital economies and societies. For instance, migrant workers use stablecoins to send remittances home, bypassing high fees and bureaucratic hurdles associated with traditional money transfer services. Similarly, in Nigeria—where a large portion of the population is unbanked—the Central Bank launched the eNaira in 2021. According to government statistics, millions of new users gained access to financial services through the CBDC, helping bridge the digital divide and support marginalized communities. Facilitating Cross-Border Trade Stablecoins significantly simplify cross-border payments by reducing costs and transfer times. Transactions are nearly instantaneous and much cheaper than traditional bank transfers or services like Western Union. CBDCs also aim to improve cross-border transactions, often through international collaborations. Notable projects include: Powering Decentralized Finance (DeFi) Stablecoins serve as foundational assets in the DeFi ecosystem. Due to their price stability, they are widely used as collateral or borrowing assets in blockchain-based lending platforms. The advent of stablecoins has greatly expanded DeFi’s reach, allowing users to trade and invest without the volatility typical of traditional cryptocurrencies. Preserving Value Amid Inflation and Currency Instability In countries facing high inflation, USD-pegged stablecoins help citizens preserve the value of their assets. Instead of holding rapidly depreciating local currency, people turn to stablecoins as a safe haven. In Nigeria, for example, where the naira depreciated sharply in 2024, stablecoins became a popular choice—helping the country become the world’s second-largest crypto user. These digital dollars enable individuals to save value without needing foreign bank accounts, serving as an effective hedge in unstable economies. Strengthening Monetary Policy and Sovereignty By issuing CBDCs and aggregating user data from wallet providers, central banks gain precise tools to manage money supply and monitor cash flow in real-time. This enhances the effectiveness of monetary policy by reducing reaction time and improving decision-making accuracy. CBDCs also help preserve national monetary sovereignty in the face of competing digital currencies. Unlocking Opportunities for Fintech Innovation CBDCs or stablecoins could attract domestic fintech companies to participate in emerging technology markets—such as the development of open banking products, decentralized finance (DeFi), or cloud-based services—thereby enhancing the country’s financial infrastructure.They also help position a nation as a digital innovation and tech-startup-friendly environment, while still maintaining financial and monetary stability. Stablecoins and CBDCs are promising solutions that can drive the growth of the digital economy.Stablecoins offer flexibility and are widely adopted by the private sector and in emerging markets, whereas CBDCs act as state-led tools to modernize financial systems and improve control over money flows. CBDCs are expected to shape the future of national currencies in the digital era. The
[Stablecoins Report] What Are Stablecoins? Popular Stablecoins Today – Part 1
In the volatile world of cryptocurrency, stablecoins have emerged as a type of digital asset designed to maintain a stable value by being pegged to traditional assets such as fiat currencies or commodities. More than just a medium of exchange, stablecoins play a vital role in decentralized finance (DeFi) and hold the potential to revolutionize the global financial system. 1. Understanding Stablecoins A stablecoin is a type of cryptocurrency engineered to maintain price stability by pegging its value to an external reference asset—typically a fiat currency like the US Dollar. The main goal of stablecoins is to combine the advantages of cryptocurrencies (such as fast, borderless, peer-to-peer transactions) with the price stability of traditional assets. Each unit of stablecoin is usually backed by an equivalent amount of a real-world asset (e.g., 1 USDT backed by 1 USD), ensuring its value remains close to a 1:1 peg. Key characteristics of stablecoins: Thanks to these benefits, stablecoins are acting as a bridge between the crypto economy and traditional finance, helping mitigate price volatility in crypto markets. 2. Types of Stablecoins Stablecoins use different mechanisms to maintain their value. Based on the underlying collateral and price-pegging method, they can be classified into the following main categories: • Fiat-Collateralized Stablecoins This is the most common type, backed by reserves of fiat currency held by a centralized issuer. Each stablecoin in circulation is matched by an equivalent amount of fiat currency (e.g., USD, EUR) stored in a bank account.Examples: Tether (USDT), USD Coin (USDC) – both pegged 1:1 to the US Dollar. • Commodity-Backed Stablecoins These are pegged to physical assets such as gold or oil.Example: Tether Gold (XAU₮) – each XAU₮ token is backed by one troy ounce of physical gold held in reserve. This enables users to hold commodities in a digital format. • Crypto-Collateralized Stablecoins These are backed by other cryptocurrencies (such as ETH or BTC). Due to the volatile nature of crypto assets, overcollateralization is typically required. This means $1 worth of stablecoin is often backed by $1.5–2 worth of crypto. This buffer helps maintain the peg even if the backing asset declines in value.Example: DAI (MakerDAO) – designed to track the US Dollar. Users lock crypto assets (e.g., ETH, USDC) in smart contracts to mint DAI. If the collateral value drops too low, the system automatically liquidates it to maintain full backing and price stability. • Algorithmic Stablecoins These stablecoins may have little to no collateral and maintain their peg through algorithms and market mechanisms. Instead of holding reserves, the protocol adjusts the stablecoin’s supply in response to market demand.Smart contracts automatically mint or burn tokens when the price deviates from the target peg.Examples: Ampleforth (AMPL), which adjusts daily token supply to stabilize price, or FRAX, which initially used a hybrid model of partial collateral and algorithmic stabilization. The benefit of this model is full decentralization, as it doesn’t rely on a centralized reserve. However, it carries high risk—market confidence is crucial. If the algorithm fails, the peg can collapse completely.Case in point: The crash of TerraUSD (UST) in 2022, a former leading algorithmic stablecoin, which lost its peg entirely. Other classification approaches: Still, the three main categories—fiat-backed, crypto-backed, and algorithmic—form the foundation of most stablecoins in today’s market. Each comes with trade-offs regarding stability, decentralization, and reliance on trusted third parties. 3. Most Popular Stablecoins Today (Market Cap, Mechanism, Transparency, Adoption) The stablecoin market has seen rapid growth, with hundreds of projects launched. However, most of the market capitalization is concentrated in a few key players. Below is an overview of major stablecoins, comparing their mechanisms, scale, and trustworthiness: Stablecoin Type & Collateral Price Pegging Mechanism Market Cap (USD) Transparency & Trust Popularity USDT (Tether) Fiat (USD) Fully backed by reserves of cash and US Treasury bills held by Tether ≈ $80B (largest) Widely used but has faced scrutiny over reserve transparency Most widely adopted globally; accounts for ~2/3 of stablecoin supply; high liquidity on CEXs and DeFi USDC (Circle) Fiat (USD) Fully backed by reserves held by Circle’s licensed banking partners (cash & US Treasuries) ≈ $25–30B (2nd largest) Highly transparent: weekly attestations, reserves held in reputable US banks; governed by Center (Circle & Coinbase) Highly trusted, second-most popular; adopted by financial institutions; integrated into DeFi and payment systems (e.g., Visa, Mastercard pilots) DAI (MakerDAO) Crypto (multi-asset) Overcollateralized by crypto assets (ETH, USDC, WBTC, etc.) locked in smart contracts; auto-liquidation if collateral value drops ≈ $5B (largest decentralized stablecoin) Fully on-chain transparency; governed by MakerDAO community; partially reliant on centralized assets like USDC Popular in DeFi: widely used in lending protocols, yield farming, and viewed as a leading decentralized stablecoin FRAX (Frax Finance) Hybrid: crypto & algorithmic Initially partially collateralized (USDC + crypto) and algorithmically managed via FXS token; after Terra crash, moved to 100% collateralization ≈ $1B (Top 5 in 2023) Transparent mechanism and collateral; governed by DAO; move to full collateral improved credibility; still reliant on crypto assets and unaudited Innovative hybrid model; once the most successful algorithmic stablecoin; used in select DeFi protocols and communities, but scale remains smaller than USDT/USDC Other notable stablecoins include: Despite increasing competition, USDT and USDC dominate the market in both volume and liquidity, forming the backbone of most global crypto transactions.