US CBDC Stalls Amid Delays – Is It Good or Bad for USDT?
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US CBDC Stalls Amid Delays – Is It Good or Bad for USDT?
If the Federal Reserve issues a CBDC, it would be a different species from existing on-chain stablecoins such as USDT, USDC, PYUSD, or DAI.
Navigating Web3 tides with focused insightsAuthor: Terry
On November 1, PayPal received a subpoena from the U.S. Securities and Exchange Commission (SEC) Enforcement Division regarding its dollar-pegged stablecoin, casting a shadow over PYUSD that echoes the regulatory challenges Facebook faced when launching Libra.
Meanwhile, as global stablecoins continue to diversify, countries around the world are actively researching and rolling out central bank digital currencies (CBDCs). Moves by U.S. regulators have drawn particular global attention. Recently, U.S. Representative Tom Emmer of the House Financial Services Committee introduced the "CBDC Anti-Surveillance State Act," aiming to prevent the Federal Reserve from issuing CBDCs directly to individuals or indirectly through intermediaries.
The Fed vs. Congress: Regulatory and Privacy Tensions
Facebook's (now Meta) June 2019 whitepaper on its private digital currency project Libra acted in some ways as a catalyst, accelerating central banks' own digital currency initiatives and significantly boosting global interest in CBDCs and stablecoin systems.
According to data from the Atlantic Council, a total of 131 countries (accounting for over 90% of global GDP) are exploring CBDCs. However, among the four largest central banks in developed economies—the Federal Reserve, European Central Bank, Bank of Japan, and Bank of England—progress has been relatively cautious. The United States, in particular, lags behind in CBDC development.
In short, U.S. regulators have yet to reach a consensus on whether to launch a CBDC, with the main tension stemming from differing perspectives:
U.S. lawmakers tend to oppose CBDCs on grounds of privacy and financial freedom, repeatedly warning that “a CBDC is a programmable government-controlled currency that could enable federal surveillance and restrictions on Americans’ transactions if not designed to emulate cash.”
In contrast, regulatory bodies like the Federal Reserve and SEC focus more on the impact of CBDCs on payment and settlement systems and how to regulate on-chain stablecoins.
For instance, during a congressional hearing on September 28, Federal Reserve Chair Jerome Powell stated: “There’s a lot of private-sector innovation happening outside the regulatory perimeter. When it comes to public money, we need to ensure appropriate oversight. Right now, there are indeed areas where regulation is lacking.”
He also noted that the Fed is “actively evaluating whether to issue a CBDC, and if so, in what form,” adding that a report on CBDCs, stablecoins, and cryptocurrencies will be released soon—indicating that the U.S. remains in an early research and assessment phase with no finalized technical plan for issuing a CBDC.
Although there is still no unified stance within the U.S. government on launching a digital dollar, the digitization of the U.S. dollar has already advanced significantly through the rise of dollar-backed stablecoins. Dollar stablecoins have effectively become tools of dollar digitization.
Tether and Circle: Drivers of Dollar Digitization
When Libra first emerged, many hailed it as the dawn of the “digital dollar” era—but few expected it to be almost its only moment in the spotlight.
Afterward, under intense regulatory pressure, Libra continually scaled back its ambitions. Meanwhile, the explosive growth of dollar-centric stablecoins starting in 2020 took up the mantle in conducting large-scale experiments in “digital dollar” adoption.
USDT and USDC, in particular, have become de facto dollar alternatives for many users in cross-border payments and other global applications. As of November 3, CoinGecko data shows that USDT’s circulating market cap has surpassed $85 billion, hitting a record high.
With continued growth, USDT now serves not only retail consumers but increasingly supports medium and large international corporations.
Notably, Tether holds $72.5 billion in U.S. Treasury exposure, ranking among the top 22 global holders—surpassing countries like the UAE, Mexico, Australia, and Spain. Similarly, Circle holds over $30 billion in U.S. Treasuries. Tether and Circle have effectively become de facto representatives of the Federal Reserve within the crypto industry.
Notably, after hovering around $40 million in total issuance for several days, PayPal’s dollar stablecoin PYUSD resumed minting in October and had exceeded 150 million units at the time of writing, now listed on major exchanges including Coinbase and Kraken.
As a well-known traditional payment giant, every move PayPal makes in the stablecoin space introduces new variables into an otherwise consolidated market, bringing significant traffic effects while inevitably drawing renewed regulatory scrutiny—much like Facebook’s ill-fated Libra project.
Overall, as the largest third-party payment provider in the U.S., PYUSD is poised to bring long-term benefits to the crypto market, especially given its choice to launch on Ethereum—further advancing Ethereum’s vision as a global settlement layer.
Stablecoins & CBDCs?
However, the continuous expansion of stablecoins brings both advantages and risks to the process of dollar digitization:
On one hand, as stablecoins gain wider adoption, their influence on the existing financial system grows ever larger. The combined scale of USDT and USDC has exceeded $100 billion, potentially posing systemic risks;
On the other hand, stablecoins remain largely unregulated, and if used for illicit activities such as money laundering or fraud, they could disrupt financial order;
This highlights fundamental differences between CBDCs and stablecoins. First, it must be clarified that central bank digital currencies (CBDCs) are not necessarily closely tied to blockchain technology, as all CBDCs will inherently operate on centralized systems.
Take China’s digital RMB (DCEP) as an example—it explicitly avoids mainstream public blockchain architecture and instead uses a two-tier operational model: the central bank operates at the first level, distributing DCEP to commercial banks and designated institutions, which then serve the public by offering digital wallet services and DCEP exchange. This design closely mirrors the current centralized cash distribution mechanism.
Therefore, if the Federal Reserve were to issue a CBDC, it would represent a fundamentally different category from existing on-chain stablecoins like USDT, USDC, PYUSD, or DAI. A CBDC would rely primarily on the traditional financial system for issuance and operation, integrating banks and financial institutions into the digital currency framework.
This implies that a CBDC represents a more controllable and centralized form of dollar digitization—one that does not directly compete with or displace on-chain stablecoins. Especially given that cross-system conversion between national CBDCs remains in early stages, their convenience cannot match that of globally accessible public-chain-based stablecoins like USDT.
Thus, a complementary relationship may emerge: on-chain stablecoins handling cross-border payments and settlements, while CBDCs enable various financial products and digital currency management within financial systems.
Yet, amid the ongoing development of stablecoins, Bitcoin, and other digital currencies, a more “controllable” CBDC could help central banks counter challenges posed by third-party payments and private digital currencies, better maintain financial stability, safeguard the dollar’s international status, enhance transparency, and reduce opportunities for illegal activity.
Under these circumstances, the necessity for the Federal Reserve to issue a CBDC becomes increasingly evident. How to balance the benefits and risks of stablecoins and formulate appropriate regulatory policies will be key issues for future discussion.
Summary
Whether the Federal Reserve will issue a CBDC remains uncertain. Without a legal definition, any digital currency issued by the central bank would technically be classified as a stablecoin rather than a true central bank digital currency—requiring consensus between the Fed and U.S. legislative and executive branches.
However, given the growing scale of on-chain stablecoins like USDT and USDC, and the increasing interest from tech giants behind projects like Libra and PYUSD, financial regulators are likely to act swiftly—not only to foster innovation but also to shape the future of finance.
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