02 September 2026
Digital money is entering a new phase. What began largely as a cryptocurrency and fintech story is increasingly becoming an infrastructure question for financial markets.
An Enterprising Investor analysis argues that regulated stablecoins, central bank digital currencies (CBDCs) and tokenised commercial bank deposits should no longer be viewed simply as competing forms of digital cash. As adoption expands, they are beginning to influence how transactions settle, where liquidity accumulates, how banks fund themselves and, ultimately, how capital markets are structured.
For investment professionals, the critical question is therefore shifting. Rather than asking which digital currency will prevail, it may be more useful to ask which settlement infrastructure will become the preferred cash leg for tokenised securities, collateral and cross-border transactions.
Different routes towards digital money
The global development of digital money is far from uniform.
In the United States, the process has largely followed a bottom-up model. Privately issued stablecoins expanded first, driven by features such as 24/7 transferability, faster cross-border transactions and compatibility with tokenised financial activity. Regulation subsequently began to catch up, with the GENIUS Act, signed into law in July 2025, establishing the first US federal framework for payment stablecoins. The scale of the market is already significant. Stablecoin issuance doubled over two years, while market capitalisation increased by approximately 50% during 2025. As these instruments expand, their impact extends beyond digital-asset markets. Because dollar-backed stablecoins typically hold short-term safe assets as reserves, changes in stablecoin demand can influence Treasury bill markets. They may also affect traditional bank funding if transaction balances migrate from deposits towards blockchain-based alternatives.
Chinese Mainland has taken an almost opposite approach. Private cryptocurrency activity remains tightly restricted, while the authorities have focused on building public digital infrastructure around the e-CNY. By November 2025, the digital yuan had processed more than 3.4 billion transactions worth approximately USD 2.3 trillion. A further change in January 2026 moved the e-CNY closer to a deposit-like instrument, allowing balances held with authorised commercial banks to be treated as bank deposit liabilities and potentially earn interest. At the same time, initiatives such as Project mBridge are extending the use case beyond domestic payments towards cross-border settlement.
Europe represents another variation on the public-money model. The digital euro project is being developed primarily around monetary sovereignty, privacy and payment-system resilience. Following completion of the preparation phase in 2025, the European Central Bank has indicated that, subject to legislation being adopted in 2026, a pilot could begin in 2027, with the Eurosystem potentially ready for issuance in 2029.
The real competition is in the plumbing
These different models reveal why the evolution of digital money cannot be reduced to a competition between individual tokens.
Stablecoins, CBDCs and tokenised bank deposits can all represent the same fiat currency, but that does not make them economically identical. They may have different issuers, backing assets, redemption rights, access requirements and settlement mechanisms. Each therefore carries a different combination of credit, liquidity, operational and governance risks.
The real competition is consequently taking place at a deeper level: between settlement rails, governance frameworks, and network effects.
This becomes particularly important as securities themselves become increasingly tokenised. Every securities transaction requires a corresponding cash leg. Whether that cash leg ultimately settles in commercial bank money, a tokenised deposit, a stablecoin or central bank digital currency determines where liquidity sits, which balance sheets support the transaction and what regulatory framework applies.
Network effects could prove decisive. Once a particular settlement system accumulates sufficient liquidity, acceptance and interoperability, its position can become self-reinforcing. The infrastructure that gains early institutional adoption may therefore have a significant advantage as tokenised capital markets develop.
Hong Kong as a testing ground
Hong Kong SAR provides an early indication of how these competing models could coexist.
The jurisdiction combines access to China’s public digital-money infrastructure with an emerging regulated market for privately issued stablecoins. Its Stablecoins Ordinance entered into force in August 2025, and in April 2026 the Hong Kong Monetary Authority granted its first stablecoin issuer licences.
At the same time, Hong Kong is participating in cross-border e-CNY initiatives and Project mBridge, while commercial banks are experimenting with tokenised deposits for corporate treasury and settlement applications.
Rather than producing a single winner, these developments suggest that different forms of digital money may ultimately serve different purposes. Retail payments, institutional treasury operations, foreign exchange, collateral management and tokenised securities may each favour different settlement mechanisms.
Why investors should pay attention
For investment professionals, the implications extend well beyond digital assets.
Stablecoin growth can affect demand for short-term government securities. Migration away from conventional deposits could influence bank funding and financial intermediation. CBDCs could alter cross-border payment networks, while tokenised deposits could allow incumbent banks to retain a central role in institutional settlement.
The evolution of digital money could therefore reshape liquidity flows and create new connections between banking, sovereign debt markets and tokenised assets.
The next phase will be determined less by technological announcements than by actual adoption. Investors will need to watch whether regulated stablecoins develop meaningful institutional use cases, whether tokenised bank deposits progress from individual pilots towards interoperable networks, and whether CBDCs gain traction in cross-border settlement.
Digital money is no longer developing at the margins of the financial system. Increasingly, the contest is over the infrastructure beneath it - and whoever controls the rails on which money moves could play an important role in determining how the next generation of capital markets operates.