Stablecoin vs CBDC: What’s the Difference?

Stablecoins are cryptocurrencies that are increasingly being chosen for making international transactions. Close at hand with this development, governments have begun issuing CBDCs (central bank digital currencies). Developing an understanding of both these assets could be transformative for modern businesses. For the ones that transact internationally, stablecoins and CBDCs are valuable tools in their arsenal.

Through this article, we will explore stablecoins and CBDCs, examine how they’re different, and discuss how they can be used for cross-border transactions.

Stablecoins are a kind of cryptocurrency, under the larger umbrella of digital currencies. The most notable aspect of their design is stability in value. It is achieved through a 1:1 pegging to another asset, which tends to be fiat currency or a commodity like gold. Tether's USDT and Circle's USDC are examples of stablecoins that enjoy widespread usage.

Depending on the type of asset they are pegged to, stablecoins can be:

• Fiat-collateralized
• Commodity-collateralized
• Crypto-collateralized
• Algorithmic/non-collateralized

CBDC or Central Bank Digital Currency (CBDC) is a digital form of a country’s fiat currency. It is issued and regulated by its central bank. In other words, CBDCs are government-backed digital currencies. China’s e-CNY and Jamaica’s JAM-DEX are examples of CBDCs that were launched in recent years.

Retail and wholesale CBDCs are two categories of CBDC based on use cases. Another way to categorize CBDCs is by architectural model: direct, indirect, or hybrid.

Stablecoins and CBDCs differ chiefly in their providers. Let’s understand the differences through a comparison table.

Through government backing, CBDCs function effectively like regular currencies. Taxation, security features, and centralization apply to them. In contrast, stablecoins are less regulated and decentralized.

Technology moves faster than jurisdictions can. As of 2026, regulations are still developing for digital currencies.

The circulation of digital currencies is harder to control. They’re not directly influenced by monetary policy, either. Instead, stablecoins have the capacity to affect how people use local currencies. On a larger scale, they might affect how a country controls its monetary policy.

CBDCs are under direct monetary policy control. Countries and their central banks exert this control to manage money supply, interest rates, and other metrics.

To get more credible information on both, businesses can look to research institutions for help. The Bank for International Settlements and the International Monetary Fund provide research and policy recommendations on digital currencies (including stablecoins and CBDCs). Research reports are regularly released on their websites.

Regulation of digital currencies has begun to catch up to their growth in recent years. Differences in the extent of regulation exist for all regions. But in general, stablecoin issues must ensure transparency in transactions and AML/KYC compliance.

As an example, in 2024, Hong Kong introduced a Stablecoins Bill. Following this, the US government passed the GENIUS Act in 2025. These are instances where countries established a framework for regulating stablecoins. Countries like Japan, Singapore, and the UAE have all made strides towards stablecoin regulation, too.

Much like stablecoin regulation, CBDC regulation is also on the rise. The frameworks that apply to them are state-controlled and integrated into existing banking regulations. As countries around the world begin to introduce their own CBDCs, consideration for AML/KYC compliance and accounting rules must be there.

Another way in which stablecoins vs CBDCs differ is their infrastructure and how they function on it.

Stablecoins

• Stablecoins are issued and run on public blockchain networks.
• Smart contracts determine logical aspects of stablecoin issuance and maintenance.
• They are moved across different blockchains and systems through interoperability layers.
• Operations layers determine how the stablecoin relates to off-chain components.

CBDCs

• CBDCs are issued and run on government-permissioned networks.
• Blockchain and distributed ledger technology (DLT) are used for the operation of CBDC, transaction recording, and management.
• The operation of CBDCs is tightly controlled.

The next major difference between the two digital currencies is in their use cases.

Stablecoins

Stablecoins are primarily used in global financial activities. It’s largely because they allow fast, borderless transactions, and can integrate easily with many money transfer software. Here are more stablecoin use cases:

• Used for fast and cost-effective international transactions
• Used for lending and borrowing activities in blockchain-based DeFi (Decentralized Finance)
• Used by some crypto-native companies for managing their working capital
• Used for trading cryptocurrencies
• Used for protection against inflation in financially unstable countries.

CBDCs

Central Bank Digital Currencies are typically designed for digital, domestic financial systems in mind. Here are their use cases:

• Used for domestic retail payments
• Used for interbank settlements, in the case of wholesale CBDCs
• Used to improve transaction traceability
• Used to reduce reliance on cash in a safe and secure manner

Stablecoins have existed in the cryptocurrency ecosystem for a while. As a result, the associated risks are better understood. In the world of digital currencies, CBDCs might be the safest option.

Consider the following table:

Regulations and frameworks for the management of stablecoins are in development. The risks of CBDCs, although low, are yet to be understood.

Stablecoins are being used for making cross-border payments. They’re a popular option for such transactions, owing to their speed, convenience, and ease of use. CBDCs are still being tested for their potential. Projects Aber and Inthanon-Lion Rock are evaluating digital currencies in this field. SWIFT is similarly conducting tests on CBDCs and where they might fit into the cross-border payments system.

How is this impacting the companies that often transact globally? Businesses are beginning to learn towards hybrid payment models. They want to use traditional banking or cryptocurrencies as needed to meet specific requirements. The solutions they pick at any given time have to address regulatory, compliance, and currency-conversion needs. Platforms like Xflow are beginning to offer such solutions.

A common question in digital finance is whether central bank digital currencies could eventually replace stablecoins. There are three scenarios to be considered here:

• First, it is possible that CBDCs dominate domestic payments. With government backing, security, and transparency, CBDCs could become the primary players for national payment infrastructures.
• Second, stablecoins could become a mainstay in crypto-native use cases. What are crypto-native use cases? Companies that often deal with cross-border payments and already operate in blockchain ecosystems (for example, decentralized finance or crypto trading) will find that stablecoins are a suitable payment option for their needs.
• The third expected scenario is of a hybrid ecosystem, where CBDCs and stablecoins coexist. In this scenario, stablecoins and CBDCs may eventually become interoperable. creating an environment where government digital currencies and blockchain-based assets function together.

Platforms like Xflow provide a modern alternative for companies that want to manage their international transactions easily. With payments supported in over 140 countries, transparent pricing, and state-of-the-art security built in, Xflow surpasses other contemporary payment platforms. Here’s what Xflow does differently:

• Xflow offers transparent pricing. It provides mid-market rates for savings on FX costs.
• It offers quick settlements for international transactions, with funds settled in a single business day.
• Xflow offers free e-FIRA, which can be downloaded within just 24 hours of payment.
• Xflow connects with your ecosystem, offering third-party integration into accounting systems like Zoho Books.
• Xflow’s transactions are powered by the world’s largest banks. ISO 27001 and SOC 2 certifications provide built-in security into the platform.

With these competencies, Xflow can help companies manage their cross-border payments effectively.

With this, the bottom line is that digital currencies (including stablecoins and CBDCs) are changing digital money. The world is moving towards a future where the key features of both – speed and regulation, flexibility and reach – are integrated into one system. 

In the face of these changes, you want a payment partner that understands your needs. Choose Xflow today to manage your cross-border transactions.